Endogeneity in Empirical CorporateFinance

ArXiv ID: ssrn-1748604 “View on arXiv”

Authors: Unknown

Abstract

This chapter discusses how applied researchers in corporate finance can address endogeneity concerns. We begin by reviewing the sources of endogeneity - omitted

Keywords: Endogeneity, Corporate Finance, Instrumental Variables, Quasi-Natural Experiments, Omitted Variables Bias, Equity

Complexity vs Empirical Score

• Math Complexity: 7.0/10
• Empirical Rigor: 4.0/10
• Quadrant: Lab Rats
• Why: The paper is highly technical, covering advanced econometric techniques like instrumental variables, panel data methods, and regression discontinuity designs, which places it firmly in high math complexity. However, it is a theoretical survey/review focused on methodology rather than presenting backtest-ready data or specific implementations, leading to low empirical rigor.

  flowchart TD
    A["Research Goal<br>Address Endogeneity in Corporate Finance"] --> B["Identify Endogeneity Source<br>e.g., Omitted Variables"]
    B --> C{"Choose Methodology"}
    C --> D["Instrumental Variables<br>IV Approach"]
    C --> E["Quasi-Natural Experiments<br>DID / RD Designs"]
    D --> F["Data & Inputs<br>Equity Data, Instrument Validity"]
    E --> F
    F --> G["Computational Process<br>2SLS / Regression Analysis"]
    G --> H["Key Findings<br>Validated Causal Inferences<br>Reduced Bias in Equity Studies"]