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Discussion Paper Details

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Title: Spillover Effects in Empirical Corporate Finance

Author(s): Tobias Berg, Markus Reisinger and Daniel Streitz

Publication Date: December 2020

Keyword(s): credit supply, Direct vs. Indirect Effects and Spillovers

Programme Area(s): Financial Economics

Abstract: Despite their importance, the discussion of spillover effects in empirical research often misses the rigor dedicated to endogeneity concerns. We analyze a broad set of workhorse models of firm interactions and show that spillovers naturally arise in many corporate finance settings. This has important implications for the estimation of treatment effects: i) even with random treatment, spillovers lead to a complicated bias, ii) fixed effects can exacerbate the spillover-induced bias. We propose simple diagnostic tools for empirical researchers and illustrate our guidance in an application.

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Bibliographic Reference

Berg, T, Reisinger, M and Streitz, D. 2020. 'Spillover Effects in Empirical Corporate Finance'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15549