In this paper we investigate the association between local creative culture, and firm value. Using data of US listed firms, we find strong evidence that firms headquartered in US counties with highly creative cultures generate higher firm value. We also find evidence that the positive association between creative culture and firm value is mediated partially through both the innovation and cash holding channels. Our results hold after controlling for endogeneity concerns. Our study contributes to the emerging literature on local creative culture by documenting that such a culture influences managers to undertake risky but profitable projects, thereby, increasing firm value.
