This paper investigates whether firm location affects relations of ROE, R&D-to-sales, and firm size with market-to-book.
Local parameters that are specific to firm location are estimated by weighting observations in function of their proximity.
The effect of ROE increases with local earnings quality, which is consistent with the sharing of the accounting practices.
According to value-enhancing spillover of knowledge among nearby firms, the effect of R&D is boosted by within-region R&D.
The small-size effect weakens with the firm isolation, which supports the superior information of local investors.