Instrumental Variables

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"]

Does Corporate Governance Predict Firms’ Market Values? Evidence from Korea ArXiv ID: ssrn-2094729 “View on arXiv” Authors: Unknown Abstract We report strong OLS and instrumental variable evidence that an overall corporate governance index is an important and likely causal factor in explaining Keywords: corporate governance, OLS regression, instrumental variables, firm performance, agency theory, Equities (Corporate Governance) Complexity vs Empirical Score Math Complexity: 2.5/10 Empirical Rigor: 7.0/10 Quadrant: Street Traders Why: The paper relies on standard econometric techniques (OLS, 2SLS) with accessible interpretation (Tobin’s q, t-stats) rather than dense mathematical theory, but demonstrates strong empirical rigor through a large dataset, instrumental variables exploiting a natural experiment (regulatory threshold), and robustness checks. flowchart TD A["Research Goal<br>Does Corporate Governance<br>Predict Firm Market Value?"] --> B["Data Source<br>Korean Stock Market Data"] B --> C["Key Methodology<br>OLS & Instrumental Variables IV"] C --> D["Computational Process<br>Regressing Firm Value on<br>Corporate Governance Index"] D --> E{"Key Finding"} E --> F["Strong Causal Evidence<br>Corporate Governance<br>Significantly Predicts Market Value"]

Does Corporate Governance Predict Firms’ Market Values? Evidence from Korea ArXiv ID: ssrn-311275 “View on arXiv” Authors: Unknown Abstract We report strong OLS and instrumental variable evidence that an overall corporate governance index is an important and likely causal factor in explaining Keywords: corporate governance, OLS regression, instrumental variables, firm value, ownership structure, Equities (Corporate Governance) Complexity vs Empirical Score Math Complexity: 2.0/10 Empirical Rigor: 7.0/10 Quadrant: Street Traders Why: The paper primarily uses OLS and instrumental variable (IV) regression methods without advanced mathematical derivations, placing math complexity at a low level. However, it demonstrates high empirical rigor with a clear backtest-ready design, including a proprietary index (KCGI), instrumental variables based on Korean legal rules, and sensitivity checks on market value metrics. flowchart TD A["Research Question: Does Corporate Governance<br>predict Korean firms' market value?"] A --> B["Data & Inputs<br>Firm-level governance & value data from Korea"] B --> C["Methodology: Core Analysis"] C --> D["OLS Regression<br>Initial association estimates"] C --> E["Instrumental Variables<br>Address endogeneity, estimate causal effect"] D & E --> F["Key Findings<br>Governance index significantly explains<br>and likely causes higher firm value"]