Hi,
I am seeing the impact of ESG on financial performance (tobin q) in non-financial firms of OIC. The GDP growth is used as country level control variable but amazingly the impact of GDP growth is negative on financial performance. There was some justification for banking (financial) sector but could not find for non-financial firms. Can someone help.
Assuming that your model has no specification errors, one possible explanation might be as: as economic growth rises, Aggregate demand in increased, which (through loanable funds market) put upward pressure on interest rates, which can arguably be one of the reasons for low financial performance of non financial firms.
Hi Aman Burki
i advice to check some potential problems with your econometric specifications before trying to interpret this sign.
I think multiple problems can invert the sign
(1) multicollinearity
(2) Omit variable bias (Try Ramsey test)
(3) individual effects not introduced
(4) endogeinty problem not solved through good instruments
(5) assuming linearity in your model without testing for this
Hi All thanks for the replies. I've taken the GDP growth data from WDI. I am nor sure it was nominal or real gdp growth as nothing was mentioned in the data. Can this also be a reason of negative impact?
- Badges
- Science topic
- Similar topics
- Computer Science
- Computer Communications (Networks)
- Internet