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

Maria Boutchkova*, Diego Cueto, Angelica Gonzalez

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

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 optimize the hand-collection and pre-processing of governance data and thereby increase statistical power and/or to distinguish whether lack of significance is due to low time variation as opposed to absence of a true relationship between their governance variable of interest and the respective outcome.

Original languageEnglish
Pages (from-to)1215-1269
Number of pages63
JournalReview of Quantitative Finance and Accounting
Issue number3
Early online date16 Jul 2022
Publication statusPublished - Oct 2022

Keywords / Materials (for Non-textual outputs)

  • ownership
  • business groups
  • family firms
  • cross-sectional and time-series variation
  • pyramids
  • ultimate cash flow rights
  • controlling ownership
  • control rights
  • ownership wedge
  • board independence
  • low time variation
  • within-firm estimator
  • pyramid structures


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