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1、THE JOURNAL OF FINANCEVOL. LXV, NO. 2APRIL 2010Financial Structure, Acquisition Opportunities, and Firm LocationsANDRES ALMAZAN, ADOLFO DE MOTTA, SHERIDAN TITMAN, and VAHAP UYSALABSTRACTThis paper investigates the relation between firms locations and their corporatefinance decisions. We develop a mo
2、del where being located within an industry clusterincreasesopportunitiestomakeacquisitions,andtofacilitatethoseacquisitions,firmswithin clusters maintain more financial slack. Consistent with our model we find thatfirms located within industry clusters make more acquisitions, and have lower debt rat
3、ios and larger cash balances than their industry peers located outside clusters.We also document that firms in high-tech cities and growing cities maintain morefinancial slack. Overall, the evidence suggests that growth opportunities influencefirms financial decisions.IN1992,THE APACHE CORPORATION,
4、then a small oil and gas firm located in Denver (CO), acquired MW Petroleum, a subsidiary of Amoco Corporation, a major integrated oil company. This acquisition, which more than doubled the size of its oil and gas reserves, was viewed by Apaches top management as amajor success, and to a large exten
5、t defined Apaches future strategy: to growby acquiring mature oil and gas fields from the major integrated oil firms. To implement this strategy Apache moved from Denver to Houston (TX), wheremost of the major oil firms had operations, and reduced its debt ratio to im- prove its credit rating. By lo
6、cating in Houston, Apaches management believed that they would have better access to and knowledge about potential deals. Maintaining an investment grade bond rating (Apache had a B rating when they acquired MW Petroleum and reached an A rating a few years later) wasAndres Almazan is from the Univer
7、sity of Texas. Adolfo de Motta is from McGill University.Sheridan Titman is from the University of Texas and the National Bureau of Economic Research. Vahap Uysal is from the University of Oklahoma. We would like to thank for helpful comments: Alberto Abadie, Jason Abrevaya, Aydogan Alti, Matthias B
8、uhlmaier, Louis Ederington, Chitru Fernando, Lorenzo Garlappi, Charles Hadlock, Campbell Harvey (the Editor), Simi Kedia, Scott Lynn, Bill Megginson, Gordon Phillips, Roberto Rigobon, Pradeep Yadav, an anonymous associate editor, an anonymous referee, and seminar participants at Baylor University, B
9、oston College, Brigham Young University, UC-Irvine, Columbia University, Drexel University, Fundacion Rafael del Pino, Princeton University, Rutgers University, Texas Christian University, Universidad Carlos III, University of Essex, University of Michigan, University of Oklahoma, University of Sout
10、hern California, UT-Dallas, UT-Austin,Vienna Graduate School of Finance, WFA-Hawaii, and York Uni-versity. Adolfo de Motta thanks IFM2 for its financial support.529530The Journal of FinanceR?viewed by Apaches management as essential, since their acquisition strategy required an ability to raise capi
11、tal on relatively short notice.1This paper examines whether, as the Apache case suggests, a firms acquisi-tion and financing choices are related to its location. More specifically, we exam-ine whether these choices are related to whether the firm is located within an industry cluster, that is, close
12、 to many of its industry peers. To study these is- sues, we start by developing a simple model that describes the relation betweena firms location, financial structure, and acquisition activities. Consistent withApaches experience, our model assumes that firms located in industry clusters have more
13、acquisition opportunities but also face greater competition fromother potential acquirers. To take advantage of these opportunities the firms inclusters maintain more financial slack, because by doing so they can bid more aggressively for acquisitions.To test this model, we examine the extent to whi
14、ch firms located in industryclusters are more acquisitive, the interaction between financial structure, loca-tion, and acquisition activity, and the extent to which firms in clusters maintainmore financial slack. Since an industry cluster is somewhat of a nebulous con- cept, our empirical tests exam
15、ine the robustness of our results with respect toa number of cluster definitions. One set of definitions uses the absolute numberof firms within an industry in a metropolitan area. A second set defines clus-ters as the proportion of firms in an industry located in the metropolitan area. Finally, we
16、do an in-depth analysis of the software industry (SIC code 737)since this is an industry with a large number of firms and a very well-defined industry cluster in Silicon Valley.We find that after controlling for industry affiliation, firms located in clustersmake more acquisitions, which is consistent with the idea that firms in clusters have more opportunities. In addition, as documented in previous research,we find that firms with more financial slack tend to make more acquisition
