Faculty Publications

The Impact Of Geographic And Cultural Dispersion On Information Opacity

Document Type

Article

Keywords

Cost of capital, Cultural distance, Geography, Transparency

Journal/Book/Conference Title

Journal of Real Estate Finance and Economics

Volume

59

Issue

2

First Page

166

Last Page

208

Abstract

This paper investigates the influences of intrafirm geographic and cultural dispersion, the distance between the location of a firm’s investments and its headquarters, on the firm’s information environment. Specifically, using a sample of publicly traded real estate companies across the Asia-Pacific region, we examine how intrafirm geographic and cultural distance impacts a firm’s capital acquisition costs. As a consequence of both the heavily regulated operating environment faced by these firms, as well as the capital intensive nature of this industry, funding costs should be of pronounced importance to firms within this sector. Consistent with this paradigm, we find that firms with geographically disperse investments exhibit enhanced informational opacity. Specifically, firms with more geographically disperse investments exhibit higher capital acquisition costs than their more geographically concentrated counterparts. Similarly, firms with more culturally disparate investments also exhibit enhanced informational opacity, as evidenced by increased capital costs. Additionally, we present evidence that the impact of both physical and cultural distance is increasing following the global financial crisis. Taken together, our results provide strong evidence that both intrafirm geographic and cultural dispersion materially impact both an organization’s information environment and funding costs.

Department

Department of Economics

Original Publication Date

8-15-2019

DOI of published version

10.1007/s11146-017-9607-2

Repository

UNI ScholarWorks, Rod Library, University of Northern Iowa

Language

en

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