DP15549 Spillover Effects in Empirical Corporate Finance
Author(s): | Tobias Berg, Markus Reisinger, Daniel Streitz |
Publication Date: | December 2020 |
Keyword(s): | credit supply, Direct vs. Indirect Effects, Spillovers |
JEL(s): | C13, C21, G21, G32, M41, M42, R11, R23 |
Programme Areas: | Financial Economics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=15549 |
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.