Does Headquarters Location Matter for Corporate Cash Holdings?

We find that firms whose headquarters are in states with vulnerable real estate markets are associated with more cash holdings. We document consistent results using a subset of firms that relocate. Further analysis reveals that in addition to risk per se, the local environment affects firms through the risk perception channel by increasing the observability of risk. Consistent with this channel, we show real estate market vulnerability affects firms irrespective of whether their operations and financing are dependent on headquarters states. The results are robust after controlling for firms’ real estate holdings, industry heterogeneity, firm-level riskiness, and alternative measures.