【Abstract】

Exploiting the staggered expansion of China’s passenger-dedicated high-speed rail (HSR) network, we study the relationship between HSR connection and firm performance. By highlighting the importance of firm location and face-to-face interactions, we test the differential impact of HSR connection on the performance and growth of firms that differ in their dependence on communication and inter-city travel as production inputs. Our results confirm that firms in communication-intensive and travel-dependent industries benefit more from the operation of the HSR. Moreover, in examining the specific mechanisms at work, we find evidence that the HSR promotes firm performance and growth for the communication-intensive and travel-dependent through increased analyst attention, productivity boosts, and market expansions. Our findings imply that face-to-face interactions, through facilitating the exchange and acquisition of information, are potentially important for our understanding of “local (home) bias” of investment documented in the literature.

【Keywords】

Communication cost, High-speed rail, Firm location, Firm performance

【Authors】

Kuang Chun, School of Banking and Finance, University of International Business and Economics

Liu Zijie, Simon Business School, University of Rochester

Zhu Wenyu, IMI Research Fellow, School of Finance, Renmin University of China