Ahn Dang, V. A., Kim, M. and Shin, Y. (2015) In search of robust methods for dynamic panel data models in empirical corporate finance. Journal of Banking and Finance, 53, pp. 84-98. (doi: 10.1016/j.jbankfin.2014.12.009)
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Abstract
We examine which methods are appropriate for estimating dynamic panel data models in empirical corporate finance. Our simulations show that the instrumental variable and GMM estimators are unreliable, and sensitive to the presence of unobserved heterogeneity, residual serial correlation, and changes in control parameters. The bias-corrected fixed-effects estimators,based on an analytical, bootstrap, or indirect inference approach, are found to be the most appropriate and robust methods. These estimators perform reasonably well even in models with fractional dependent variables censored at [0,1]. We verify these results in two empirical applications, on dynamic capital structure and cash holdings.
| Item Type: | Articles |
|---|---|
| Keywords: | Dynamic panel data estimation; GMM; bias correction; capital structure; cash holdings |
| Status: | Published |
| Refereed: | Yes |
| Glasgow Author(s) Enlighten ID: | Kim, Dr Minjoo |
| Authors: | Ahn Dang, V. A., Kim, M., and Shin, Y. |
| Subjects: | H Social Sciences > HA Statistics H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
| College/School: | College of Social Sciences > Adam Smith Business School > Economics |
| Journal Name: | Journal of Banking and Finance |
| Publisher: | Elsevier B.V. |
| ISSN: | 0378-4266 |
| ISSN (Online): | 1872-6372 |
| Related URLs: |
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