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Review of Finance Vol. 27 No. 3 2023

Expanding Footprints: The Impact of Passenger Transportation on Corporate Locations

Yatang Lin1; Yu Qin2; Johan Sulaeman3; Jubo Yan4; Jialiang Zhang5

1 Department of Economics, Division of Public Policy and Social Science, HKUST, Hong Kong · 2 Department of Real Estate, NUS Business School, National University of Singapore , · 3 Sustainable and Green Finance Institute (SGFIN) and NUS Business School, National University of Singapore , · 4 School of Social Sciences, Nanyang Technological University , · 5 School of Economics, Central University of Finance and Economics ,

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.

DOI
10.1093/rof/rfac049
Volume
27
Issue
3
Pages
1119-1154
Language
en
Sources
openalex crossref bibtex:phds-export.bib

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