Graduation Year
2025
Date of Submission
12-2024
Document Type
Open Access Senior Thesis
Degree Name
Bachelor of Arts
Department
Economics-Accounting
Reader 1
Joshua Rosett
Reader 2
Yong Kim
Terms of Use & License Information
Rights Information
©2024 Stuart D McCallum
Abstract
This thesis examines the whether a corporation materially gains when they relocate their headquarters from California to another state. The empirical evidence comes from an event study approach looking at the stock market reaction in the days after a public announcement was made as well as a financial statement analysis approach. The initial stock market reaction on the first trading day after the announcement is made is positive and significant, with an average abnormal return of 1.22%. The magnitude of the event study findings aligns with previous studies into corporate headquarter relocation announcements. However, unlike previous studies on the stock market reaction to relocation announcements, the reason why a firm left has minimal statistically significant impact on abnormal returns. The equity market reaction for firms who moved to Texas, the most common destination state, was not greater than the reaction for firms who moved to other states. Multi-year Financial Statement Ratio Analysis found some evidence of statistically significant differences in Return on Assets (ROA), Effective Tax Rate, and SG&A Expense Margin between the group of movers and a matched sample using a stacked difference in differences approach. The strongest significant results were a reduction in SG&A expenses as a percentage of revenue for movers out of California. Overall, there is some evidence that firms do benefit in the short and medium term when they relocate out of the Golden State.
Recommended Citation
McCallum, Stuart, "Do Corporations Gain When They Leave California? Evidence from Equity Markets and Financial Statements" (2025). CMC Senior Theses. 3783.
https://scholarship.claremont.edu/cmc_theses/3783