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Expanding Footprints: The Impact of Passenger Transportation on Corporate Locations

Author

Listed:
  • Yatang Lin
  • Yu Qin
  • Johan Sulaeman
  • Jubo Yan
  • Jialiang Zhang
Abstract
This article investigates how transportation networks shape firms’ geographic footprint by reducing monitoring costs of distant investments. Exploiting the staggered expansions of China’s passenger high-speed rail (HSR) network, we document that the amount of intercity investment between a pair of cities increases by 45% with the introduction of an HSR line connecting the cities. We enhance the causal inference by applying high-dimensional fixed effects, and focusing on city pairs that are “accidentally” connected in the network. The HSR effect is the strongest in industries that require on-site monitoring, as well as for controlling stakes in large distant investments.

Suggested Citation

  • Yatang Lin & Yu Qin & Johan Sulaeman & Jubo Yan & Jialiang Zhang, 2023. "Expanding Footprints: The Impact of Passenger Transportation on Corporate Locations," Review of Finance, European Finance Association, vol. 27(3), pages 1119-1154.
    • Handle: RePEc:oup:revfin:v:27:y:2023:i:3:p:1119-1154.
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    File URL: http://hdl.handle.net/10.1093/rof/rfac049
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    References listed on IDEAS

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    Cited by:

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    2. Ouyang, Caiyue & Xiong, Jiacai & Liu, Li & Yao, Jun, 2024. "Geographic proximity and trade credit: Evidence from a quasi-natural experiment," Journal of Corporate Finance, Elsevier, vol. 84(C).
    3. Liu, Xiaoying & Wang, Yujing & Li, Meng & Gao, Haoyu, 2024. "The importance of speed to corporate financial asset holdings: Evidence from high-speed rail," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
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    5. Kuang, Chun & Wei, Mengying & Zhu, Wenyu, 2023. "The spatial impact of high-speed rail on firm performance: The role of proximity to urban cores," Economics Letters, Elsevier, vol. 231(C).
    6. Long, Cheryl Xiaoning & Yi, Wei, 2024. "Information effects of high-speed rail: Evidence from patent citations in China," China Economic Review, Elsevier, vol. 84(C).

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    More about this item

    Keywords

    High-speed rail; Home bias; Investment flows; Geographic footprint;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

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