Follow Me Home: Investor Reactions to Cross-Border Headquarters’ Relocations

Multinational enterprises (MNEs) have increasingly been relocating headquarters (HQs) across borders. While literature has investigated this phenomenon primarily from a firm-level business perspective, the investors’ ability to assess such strategic moves has been overlooked. To address this shortcoming, we take an investors’ perspective on HQ relocations and analyze how investors reallocate their portfolio in response to announcements of HQ relocations. We exploit the setting that an HQ relocation impacts the location of the investors vis-à-vis the MNE differently across investors, such that some home investors become foreign investors and vice versa. We connect this peculiarity to investors’ home bias and build theory around different investors’ reactions on announcements of HQ relocations contingent upon their location, the investors’ sector, the HQ type, and the HQ’s embeddedness in the domestic market. To test our hypotheses, we track investments between 2009 and 2022 across more than 22,000 firms to compare shifts in investments when firms relocate their HQs (n=181) against other firms. Through an event study in a staggered difference-in difference setting, we find that investors show a substantial home bias and significantly divest from (invest into) firms that relocate their HQ away from (to) the investors’ home country. The investors’ home bias is stronger for household investors, relocations of corporate HQs, and relocations of more embedded HQs. We contribute to the literature on HQ relocations, investor behavior, and liability of foreignness.