Test power properties of within-firm estimators of ownership and board-related explanatory variables with low time variation

64 Pages Posted: 1 Nov 2018 Last revised: 11 Aug 2021

See all articles by Maria Boutchkova

Maria Boutchkova

University of Edinburgh

Diego C. Cueto

ESAN Graduate School of Business

Angelica Gonzalez

University of Edinburgh

Date Written: July 1, 2021

Abstract

Corporate governance research is often limited in its ability to employ within-firm estimators, which address time-invariant endogeneity, when the variables of interest exhibit low time variation (for example, ownership and board independence). The problem is further exacerbated if data for multiple points in time needs to be hand-collected. We offer simulation-based methodological guidance to improve the statistical power of within-firm estimators in the presence of low time variation. We illustrate the usefulness of our simulation results by replicating two influential studies on ownership and board independence and extending them with a within-firm estimator. Based on widely used databases as well as a novel granular database, we document the different degrees and nature of time variation of ownership and board independence across jurisdictions and subgroups by listed status, family control and complexity of ownership structure. Researchers can use our findings to make empirical design decisions and informed choices about the frequency of sampling and/or hand collection of fewer non-consecutive time periods that ensure sufficient time variation and statistical power.

Keywords: controlling ownership; ultimate cash flow rights; control rights; ownership wedge; board independence; low time variation; family firms; within-firm estimator; pyramid structures

JEL Classification: G15, G32

Suggested Citation

Boutchkova, Maria and Cueto, Diego C. and Gonzalez, Angelica, Test power properties of within-firm estimators of ownership and board-related explanatory variables with low time variation (July 1, 2021). Available at SSRN: https://ssrn.com/abstract=3263406 or http://dx.doi.org/10.2139/ssrn.3263406

Maria Boutchkova (Contact Author)

University of Edinburgh ( email )

Business School
29 Buccleuch Place
Edinburgh, EH89JS
United Kingdom

Diego C. Cueto

ESAN Graduate School of Business ( email )

Alonso de Molina 1652
Lima 33
Peru
(511) 317-7200 (Phone)
(511) 345-1328 (Fax)

HOME PAGE: http://www.esan.edu.pe/

Angelica Gonzalez

University of Edinburgh ( email )

Old College
South Bridge
Edinburgh, Scotland EH8 9JY
United Kingdom

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