Bias correction in the estimation of dynamic panel models in corporate finance

Ownership concentration and corporate performance from a dynamic perspective: Does national governance quality matter?

“…Using the combined dataset of two markets, we find no statistical evidence on the effect of Y it − 2 on Y it , suggesting that oneyear lagged Tobin's Q appears to be adequate to capture all influence of the past on the current realisations of performance. This is in line with Zhou et al (2014) who argue that given the limitation of the time dimension in corporate finance panel datasets, an AR(1) panel model seems to be unavoidable in almost empirical corporate finance studies. Using the measures of corporate governance mechanisms and other firm-level characteristics mentioned in Subsection 3.2, Eq.…”

“…To the best of our knowledge, no prior study on these two markets has treated the ownership concentration-performance relationship this way. More interestingly, by doing so, our study well-responds to the recent calls from Flannery and Hankins (2013); Wintoki et al (2012) and Zhou, Faff, and Alpert (2014) for using dynamic panel models in corporate finance and corporate governance research.…”

“…It should be noted that this study employs a dataset that has the following characteristics: (i) a panel with moderate length (T = 4); (ii) low-within-firm variation in almost all corporate governance variables; (iii) board and ownership structures are all considered endogenous; (iv) corporate governanceperformance relationship is, in nature, dynamic; and (v) financial performance (dependent variable) may be driven by individual fixed effects which are unobservable. As evidenced by the simulation analyses recently undertaken by Flannery and Hankins (2013) and Zhou et al (2014), the BB system GMM emerges as the best-performing estimator across all the above-mentioned dataset conditions. Therefore, we use the BB two-step system GMM (System GMM) as our primary estimation technique to alleviate the concerns about dynamic panel bias and endogeneity.…”

Executive Compensation, Firm Performance and Corporate Governance in an Emerging Economy

“…System-GMM reduces the effect of high persistence of corporate governance variables thereby improving the power of estimations (Blundell & Bond, 1998;Nguyen, et al, 2015). In addition, system-GMM appears to be the best-performing estimator for the data which is characterized by moderate length of time, low within firm variations in corporate governance variables, possibility of fixed effects driven dependent variable, some variables are endogenous and a dynamic relationship exists between variables (Filatotchev et al, 2013;Nguyen, et al, 2015;Zhou et al, 2014). Our data reasonably possesses similar properties.…”

Application of Case Teaching In Corporate Finance

“…As China's economic development is in the transition period, a variety of institutional factors are too complex, companies' initial public is dominated by the government, coupled with the imperfect development of China capital market which lacks effective checks and balances, so there has been a large number of corporate governance issues. [7] For example, the stock rights affinity is widespread in our country, large shareholders' infringement of minority shareholders' interest. Masahiko Aoki cited the words: the research of governance structure of a country must be based on the realities of the country's heritage and history.…”