Hi,
I am currently doing a study on impact of CSR disclosure ('x' variable) on bid-ask spreads ('y' variable). I am being faced with the problem of endogenity. It would be of great help to suggest instrumental variable(s) that is positively related to CSR disclosure and not related to bid-ask spreads.
Thanks.
We can talk if you're in Dauphine this Thursday afternoon. I can better understand your dataset and your question.
Hi,
Hope you are fine. Yes that would be great. I would be at Dauphine on Thursday afternoon.
Thanks
Finding an IV is solution to this statistical problem but it is notoriously difficult to find one due to the nature of the relationships in the data. If you can find one - look at the data you have and maybe some dummies, then to correct for endogeneity with an instrumental variable (IV) use a 2-stage least square regression (2SLS). Another method, is using a Heckman correction. For details, on the Heckman correction see his paper "Sample Selection Dias as a Specification Error" Econometrica Vol. 47, No. 1 (1979). Whatever software package you are using will probably have it already built in.
I looked up the literature and found some instances where Average Industry CSR is used as an instrumental variable. Firm level CSR is closely related to its industry norm of CSR discloure and impacts bid-ask spread through endogenous variable. (Harjoto, M., & Jo, H. (2015). Legal vs. normative CSR: Differential impact on analyst dispersion, stock return volatility, cost of capital, and firm value. Journal of Business Ethics, 128(1), 1–20 ; Nguyen, H., Agbola, F., & Choi, B. (2018). Does corporate social responsibility reduce information asymmetry? Empirical evidence from Australia. Australian Journal of Management, 1-24). It als
Hi,
If you can not find IV among either your current dataset or additional (new) variable(s), then a combination of fixed-effects panel regressions and lag of the independent variables (those of interest), would be sufficient to address endogeneity concern.
- Badges
- Science topic
- Similar topics
- Mathematical Sciences
- Statistics
- Statistical Software
- SPSS