计量经济分析 = Econometric analysis

Earnings Management and Investor Protection: An International Comparison

During the 2008-2009 financial crisis, firms with high social capital, measured as corporate social responsibility (CSR) intensity, had stock returns that were four to seven percentage points higher than firms with low social capital. High-CSR firms also experienced higher profitability, growth, and sales per employee relative to low-CSR firms, and they raised more debt. This evidence suggests that the trust between the firm and both its stakeholders and investors, built through investments in social capital, pays off when the overall level of trust in corporations and markets suffers a negative shock.

https://onlinelibrary.wiley.com/doi/pdf/10.1111/jofi.12505

Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis

This chapter discusses how applied researchers in corporate finance can address endogeneity concerns. We begin by reviewing the sources of endogeneity—omitted variables, simultaneity, and measurement error—and their implications for inference. We then discuss in detail a number of econometric techniques aimed at addressing endogeneity problems, including instrumental variables, difference-in-differences estimators, regression discontinuity design, matching methods, panel data methods, and higher order moments estimators. The unifying themes of our discussion are the emphasis on intuition and the applications to corporate finance.

/pdf/endogeneity-in-empirical-corporate-finance1-obm7n5t71j.pdf

Endogeneity in Empirical Corporate Finance1

We examine the impact of liquidity shocks by exploiting cross-bank liquidity variation induced by unanticipated nuclear tests in Pakistan. We show that for the same firm borrowing from two different banks, its loan from the bank experiencing a 1 percent larger decline in liquidity drops by an additional 0.6 percent. While banks pass their liquidity shocks on to firms, large firms-particularly those with strong business or political ties-completely compensate this loss by additional borrowing through the credit market. Small firms are unable to do so and face large drops in overall borrowing and increased financial distress.

/pdf/tracing-the-impact-of-bank-liquidity-shocks-evidence-from-an-25x2t16xaj.pdf

Tracing the Impact of Bank Liquidity Shocks: Evidence from an Emerging Market

Controlling for unobserved heterogeneity (or “common errors”), such as industry-specific shocks, is a fundamental challenge in empirical research. This paper discusses the limitations of two approaches widely used in corporate finance and asset pricing research: demeaning the dependent variable with respect to the group (e.g., “industry-adjusting”) and adding the mean of the group’s dependent variable as a control. We show that these methods produce inconsistent estimates and can distort inference. In contrast, the fixed effects estimator is consistent and should be used instead. We also explain how to estimate the fixed effects model when traditional methods are computationally infeasible.Additional programming advice can be found on our websites.

/pdf/common-errors-how-to-and-not-to-control-for-unobserved-26nut1991a.pdf

Common Errors: How to (and Not to) Control for Unobserved Heterogeneity

Controlling for unobserved heterogeneity (or “common errors”), such as industry-specific shocks, is a fundamental challenge in empirical research, as failing to do so can introduce omitted variables biases and preclude causal inference. This paper discusses limitations of two approaches commonly used to control for unobserved group-level heterogeneity in finance research—demeaning the dependent variable with respect to the group (e.g., “industry-adjusting”) and adding the mean of the group’s dependent variable as a control. We show that these techniques, which are used widely in both asset pricing and corporate finance research, typically provide inconsistent coefficients and can lead researchers to incorrect inferences. In contrast, the fixed effects estimator is consistent and should be used instead. We also explain how to estimate the fixed effects model when traditional methods are computationally infeasible. (JEL G12, G2, G3, C01, C13)

/pdf/common-errors-how-to-and-not-to-control-for-unobserved-9jczstok3b.pdf

Passive institutional investors are an increasingly important component of U.S. stock ownership. To examine whether and by which mechanisms passive investors influence firms’ governance, we exploit variation in ownership by passive mutual funds associated with stock assignments to the Russell 1000 and 2000 indexes. Our findings suggest that passive mutual funds influence firms’ governance choices, resulting in more independent directors, removal of takeover defenses, and more equal voting rights. Passive investors appear to exert influence through their large voting blocs, and consistent with the observed governance differences increasing firm value, passive ownership is associated with improvements in firms’ longer-term performance.

/pdf/passive-investors-not-passive-owners-57vugk0k3g.pdf

Passive Investors, Not Passive Owners

https://www.stern.nyu.edu/sites/default/files/assets/documents/1%20Gormley%20Passive%20Investors%20Not%20Passive%20Owners.pdf

Passive Investors, Not Passive Owners *

This paper uses the entry of foreign banks into India during the 1990s - analyzing variation in both the timing of the new foreign banks' entries and in their location - to estimate the effect of foreign bank entry on domestic credit access and firm performance. In contrast to the belief that foreign bank entry should improve credit access for all firms, the estimates indicate that foreign banks financed only a small set of very profitable firms upon entry, and that on average, firms were eight percentage points less likely to have a loan after a foreign bank entry because of a systematic drop in domestic bank loans. Similar estimates are obtained using the location of pre-existing foreign firms as an instrument for foreign bank locations. Moreover, the observed decline in loans is greater among smaller firms, firms with fewer tangible assets, and firms affiliated with business groups. The drop in credit also appears to adversely affect the performance of smaller firms with greater dependence on external financing. Overall, this evidence is consistent with the exacerbation of information asymmetries upon foreign bank entry.

/pdf/the-impact-of-foreign-bank-entry-in-emerging-markets-2edl311vlc.pdf

Todd A. Gormley

Papers

Common Errors: How to (and Not to) Control for Unobserved Heterogeneity

Common Errors: How to (and Not to) Control for Unobserved Heterogeneity

Passive Investors, Not Passive Owners

Passive Investors, Not Passive Owners *

The Impact of Foreign Bank Entry in Emerging Markets: Evidence from India