The Relation between Intrafirm Distances and Information Opacity: Evidence from Stock Market Liquidity

We examine the relation between both intrafirm geographic and cultural distance (i.e., the distance between a firm's headquarters location and its investment properties) on the underlying firm's stock market liquidity. More specifically, using a sample of 166 publicly traded REITs and listed property companies across the Asia-Pacific region over the 2000–2013 period, we find strong evidence that firms with increased levels of intrafirm (geographic) distance exhibit wider bid-ask spreads, while firms with greater intrafirm cultural dispersion enjoy narrower spreads. We conclude that intrafirm distance is fundamentally related to a firm's financial market (informational) opacity and offers both costs and benefits to market participants.