Nonpecuniary Benefits: Evidence from the Location of Private Company Sales

Author:

Jansen Mark1,Winegar Adam2

Affiliation:

1. Eccles School of Business, University of Utah , USA

2. BI Norwegian Business School , Norway

Abstract

Abstract This paper investigates whether acquisition prices reflect a specific set of nonpecuniary benefits preferred by entrepreneurs: the quality of life (QOL) associated with the business location. Using data on private firm acquisitions, we find that target firms in high-QOL cities sell for a 14% to 20% premium. Traditional financial factors do not explain this premium, which dissipates when the buyer is unlikely to have preferences for high-QOL locations. Using wage-to-housing cost differentials to decompose local amenities and data on migration patterns, we find that QOL amenities have a greater impact on entrepreneurs’ location decisions relative to wage workers. (JEL G02, G32, G34, J32, L26, R39) Received: 27 February 2022; Editorial decision: 29 January 2024 Editor: Camelia Kuhnen Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Publisher

Oxford University Press (OUP)

Reference56 articles.

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