Corporate Headquarters Relocation Research Articles

Corporate headquarters relocation and CSR performance

This study examines the relationship between corporate headquarters relocation decisions and corporate social responsibility (CSR). If the cost-savings motive is the primary force behind the relocation decision, we would expect to observe a reduction in CSR commitments of relocating firms. Our results fail to provide support for the occurrence of such a reduction, even when the move affords the firm an opportunity to do so. Following a move, firms do not reduce their CSR commitments. On the contrary, the average firm tends to significantly improve its CSR scores in the “environment” and “overall” categories. Our findings hold even after accounting for fixed effects, control variables, and addressing issues of heterogeneity and endogeneity. In investigating the driver of this outcome, we find that the local political environment of the new headquarters location plays an important role. In particular, a stronger tendency to increase CSR activities is mostly associated with relocations to a Democratic rather than a Republican state.

Why Compete for Firms? Electoral Effects of Corporate Headquarters Relocation

AbstractWhy do local and state governments in the United States compete to attract and retain corporations in their jurisdictions even by offering generous incentives, which can jeopardize public spending on other needs? This research shows that the answer can lie in the electoral effects of headquarters (HQ) relocation. Using an original data set of interstate HQ relocation cases covered in the news media from 1995 to 2015, this research finds that interstate business location decisions affect gubernatorial election outcomes. However, empirical analyses provide evidence that voters use different attribution processes when considering HQ relocation‐in versus relocation‐out cases: HQ relocation‐out results in greater support for Republican candidates, whereas HQ relocation‐in increases support for the incumbent party. Supplementary analyses suggest that the perceptual effects and symbolic value of HQ relocation, rather than its immediate local economic effects, drive electoral outcomes. The findings have implications for electoral accountability and the political economy of business–government relationships.

The Influence of Corporate Income Taxes on Investment Location: Evidence from Corporate Headquarters Relocations

This study examines the effects of jurisdictions’ corporate taxes and other policies on firms’ headquarters (HQ) location decisions. Using changes in state corporate income tax rates across time and states as the setting, we find that a one-percentage-point increase in the HQ state corporate income tax rate increases the likelihood of firms relocating their HQ out of the state by 16.8%, and an equivalent decrease in the HQ state rate decreases the likelihood of HQ relocations by 9.1%. Exploiting the unique tax policy features within the state apportionment system lends strong support to the interpretation that taxation drives this effect. Our analyses also demonstrate that state income tax features affect the destination of the HQ move. We contribute to the literature on corporate decision making by showing how state income taxation affects a real corporate decision that has significant economic consequences for the company and the state.This paper was accepted by Brian Bushee, accounting.

Corporate Relocation and Housing Market Spillover

This study investigates the spillover effect of corporate headquarters relocation on the local housing market. Using a comprehensive database to identify corporate relocation events in the U.S. from 1994 to 2017, we show that moving a corporate headquarters into a district is significantly associated with housing price appreciation in the district. The growth in housing prices for districts with a corporate headquarters relocation is 10% higher than in those without. Moreover, housing prices increase in the year before the relocation, which suggests the presence of a speculation and expectation effect. Housing prices increase further until 2 years after the relocation, which demonstrates the prolonged impact of corporate relocation on the housing market. The cumulative effect over the period results in more than 30% higher growth in housing prices for districts with a corporate relocation. Further, we find a significant spatial spillover effect of corporate relocation on nearby districts’ housing markets up to 15 miles. We next examine the channels through which corporate relocation affects housing prices, including the relocating firm’s employee base, firm activity, and agglomeration economies. Lastly, we observe a marginally negative effect as a result of a headquarters moving out of a district. Overall, our study indicates that corporate relocation exhibits significant positive spillover on the local housing market.

An Overview of German Centers of Corporate Dominance and Motives for Corporate Headquarters Relocation

The purpose of this paper is to identify the centers of corporate dominance in Germany, and the main drivers of recent headquarter relocations within the country. The analysis is based on a literature review, a database comprising the 10,000 most significant companies in Germany and additional research for qualitative input to support the interpretation of the findings. The findings show that corporate dominance in Germany is decentralized. Centers with relative corporate dominance tend to host a higher proportion of public limited companies. These public limited companies had a turnover of over one billion Euros, and most of these companies were founded after the year 2000. The main drivers for recent HQ relocations were corporate restructuring (mergers and demergers) and the centralization of functions. Furthermore, it has been found that differences in the trade tax burden between municipalities have had no influence on recent relocation decisions within Germany.

Real Effects of State Corporate Tax Rate Changes: Evidence from Corporate Headquarters Relocations

The state tax apportionment formula used to determine state taxes is a function of the taxable income attributable to the state and state corporate tax rates. In this study, we rely on changes in state corporate income tax rates and other inducements across time and states as a quasi-natural experiment to examine the effect of state taxation on corporate headquarters (HQ) relocation. We find that changes in HQ state corporate income tax rates significantly affect the likelihood of cross-state HQ relocation. Other inducements also reduce the likelihood of relocation. The results of the cross-sectional analysis suggest that the likelihood of HQ relocation is less affected by changes in HQ state corporate tax rates when (i) the state-level factor weights used to determine income attributable to the state favor property and payroll and (ii) the firm engages in tax planning to reduce taxable income. We contribute to the literature on corporate tax planning by providing further evidence of how state taxation policies affect real corporate decisions that have significant economic consequences for the state.

Rationalizing tax increment financing in Chicago

ABSTRACTA central problem in planning is how planners can be both technical experts and political actors sensitive to the moral consequences of planning. Rationality refers to the reasons for choosing a means to achieve an end; a rationality that considers the morality of means and ends is value rationality, and one that does not is instrumental rationality. Through the case of using Tax Increment Financing (TIF) to subsidize corporate headquarters relocation in Chicago, I follow City follows planners’ struggle with TIF policy and their engagement with instrumental and value rationality within a state that exercised an entrepreneurial planning strategy. This position meant that planners were constrained from acting value-rationally to consider and then take action on questions about the moral content of TIF projects. Nonetheless, planning staff developed an instrumentally-rational planning and policy exercise, which they performed as a way to channel their value-rational concerns about the assumption that every economic development project is an unambiguously valuable goal.

Catch Me If You Can: Financial Misconduct Around Corporate Headquarters Relocations

We examine whether firms relocate to avoid the scrutiny of local Security and Exchange Commission (SEC) enforcement offices and find that financial misreporting activities are positively associated with the probability of headquarters being relocated out of the jurisdiction states of local SEC office. Firms whose financial statements suggest fraudulent activities are more likely to move to locations where the regional SEC office has a history of less intense scrutiny against local firms, and they tend to relocate without providing explicit reasons. Using shocks to SEC enforcement intensity for identification, we find that these firms are more likely to relocate after the shock. Our difference-in-difference tests further suggest that relocating firms with scrutiny avoidance as a motive exhibit higher fraud scores after relocation and are more likely to file earnings restatements than their matched peers. Our results provide new evidence on the fraudulent motives for headquarters relocation, and suggest that the intensity of SEC enforcement affects corporate strategies.

The initial US stock market effect on firms that announce corporate headquarters relocation

PurposeTo examine the initial stockholder wealth impact of firms announcing corporate headquarters relocation.Design/methodology/approachThe LexisNexis Academic database were searched from December 1994 to April 2005 for US firms announcing headquarters relocation. The companies were then categorized according to the rationale (cost/consolidation, space, managerial interests, none given) for moving. Standard event study methodology, market‐model version of the capital asset pricing model, was employed to ascertain the impact of this event to stockholders.FindingsIn general, the stock‐market reaction is favorable for companies moving their head office. Moreover, stockholders react most positively to the managerial interest reason for such a shift. Nevertheless, the cost/consolidation reason and to some extent even when no reason is given shareholders viewed relocation announcements with an increase in stock returns. However, when space reasons are given for headquarters relocation, the stock returns are negative.Research limitations/implicationsThe sample is restricted to the USA and may not be reflective of other countries. Also, this study focuses on the initial stockholder wealth impact which may not be reflective of the long‐run effect of corporate headquarters relocation.Practical implicationsOrganizations considering moving their head office should evaluate their decision based on the perception of their shareholders and how they may react to such announcements. Changes in the market value of the equity, caused by headquarters relocation, will have a direct impact on the firm's ability to raise capital.Originality/valueThis paper updates empirical research in the field and provides contrary evidence of the rationale that generates a favorable stock‐market reaction.

From Global Cities to the Lands’ End: The Relocation of Corporate Headquarters and the New Company Towns of Rural America

Since the 1970s, a number of major corporations have located their corporate headquarters in rural and non-metropolitan areas. I interrogate this phenomenon, based on a case study of Lands’ End, a global apparel firm in Wisconsin. Much research has exposed how firms insulate themselves from claims made by workers and communities through organizational and spatial distance (i.e. global sourcing, casualization of employment structures). Corporate headquarters relocation presents a paradox, bringing key decision-makers in the global economy into new, face-to-face relationships with workers and communities. Negotiated against a radical transformation of local class structure, I argue that new forms of social regulation are emerging—in particular, a hybrid version of the Fordist-era company towns.

Impact of Headquarters Relocation on the Operating Performance of the Firm

Communities often compete fiercely for corporate headquarters relocations. Although headquarters relocations affect both the losing and winning communities, the authors investigate only the impact of corporate headquarters relocation on the subsequent financial performance of the firm. Prior research using event study methodology suggests that headquarters relocation announcements, when controlling for motivation of relocation, significantly affect short-term stock market reactions. Unlike previous research in this area, the authors use an industry-matched-firm comparison and investigate the impact of relocation on select performance indicators over a 6-year period surrounding the relocation. Using a sample of 167 corporate headquarters relocations during the 1990s, they find little evidence of improved operating performance after headquarters relocation. They also test for the influence of distance as a factor and find that the distance relocated has no significant impact.

Interurban Corporate Headquarters Relocation in Canada

This study examines the interurban migration of corporate headquarters in Canada for the period 1970-1982 by investigating the premise that changing socio-economic and political conditions are contributing to the relocation of corporate headquarters. The paper demonstrates that in Canada corporate relocations are tending to create a spatially more concentrated location pattern.

Assessing the impact of a corporate headquarters relocation in a metropolitan region: the case of J.C. Penney

The objective of this paper is to analyze the impact resulting from the recent move of the J. C. Penney Corporation to the Dallas-Fort Worth metropolitan area and the resulting implications of this move on the local communities. This impact is analyzed in a spatially disaggregated manner to identify the location of the impact inside the area, particularly in regard to location of generated service employment and population, and the fiscal effects that they will have in the cities and counties of the region. The metropolitan area is divided into several hundred appropriate geographical zones, and the impacts are studied for these zones. Such disaggregated studies, as opposed to conventional total impact studies, would be more helpful to public and private sectors in their decision making process in regard to developmental issues. Furthermore, the fiscal effects of such development on the regional municipalities also will be studied.

Gains from Corporate Headquarters Relocations: Evidence from the Stock Market

This paper provides empirical evidence on investors′ perceptions of the relative advantages and costs of spatial agglomeration. Specifically, we examine the stock price effects of headquarters relocations. The stock market reaction is significantly positive when relocation decisions are attributed to cost savings, indicating that cost savings available at less centralized locations outweigh any loss of enhancements associated with spatial clustering at urban centers. In contrast, decisions prompted by managerial self-interest and desire for luxurious offices elicit an adverse reaction from investors.

Corporate Headquarters Relocation: Evidence from the Capital Markets

This paper assesses the stock market reaction to announcements of corporate headquarters relocations and examines financial and geographical factors related to wealth effects and factors that influence the decision to relocate corporate headquarters. The results indicate that announcements of relocations are associated with significant positive stock price effects. On average, the stock price of relocating firms increases by 1.29% during the two‐day period around the announcement. Abnormal returns are positively related to the availability of labor and negatively related to the cost of living in the new location and the change in employment levels. A logit analysis indicates that the probability of a firm relocating is partially determined by the firm size and the rental expenses/sales ratio. The results also indicate that firm size, the employment/asset ratio levels, and listing in the NYSE/AMEX affect the decision to relocate to a Fortune‐ranked city. Finally, firms relocating to Fortune‐ranked cities are characterized by a high level of insider ownership relative to firms moving to non‐ranked cities.

Corporate Headquarters Relocation and Changes in Metropolitan Corporate Dominance, 1980-1987

During the last 30 years, U.S. metropolitan economies have experienced tremendous restructuring, and the locations of corporate headquarters have increasingly exhibited spatial shifts, both deconcentrating and dispersing. Theoretical explanations have suggested that the United States is entering the third of four stages, in which we are now witnessing the drive to regional maturity with no dominant regional center. Changes in the distribution of metropolitan corporate dominance between 1980 and 1987 are examined and related to two sets of explanatory frameworks, one spatial and the other structural. Changes in metropolitan corporate dominance were strongly related to spatial shifts in headquarters and asset location, especially shifts due to merger and acquisition activity. Changes in dominance were less strongly related to structural factors reflecting the degree of transition to the emerging service-based economy, even though population and location relative to New York were important. Finally, the effe...

PERSPECTIVES ON CORPORATE HEADQUARTERS RELOCATION IN THE UNITED STATES

This paper investigates corporate headquarters relocation in the United States for the period 1957-1980. Corporate relocations are one explanatory element in the overall spatial process of headquarters evolution within post industrial urban systems. All major corporate relocations, mergers, bankruptcies, and new incorporations that effectively transfer corporate decision making to or from any metropolitan area are recorded for the five major sectors of the economy. A series of cartograms and bargraphs provide a summary of corporate headquarters relocations for the resource, manufacturing, and service, as well as utility and financial sectors of the economy. The cartographs indicate the magnitude and direction of all headquarters relocations as well as the location of major bankruptcies and new incorporations. The bargraphs indicate the relative gains and losses through move and merger activity for all members of the urban system. The findings indicate that, in contrast to other Western economies, the domi...