Discussion paper

DP15549 Spillover Effects in Empirical Corporate Finance

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.


Berg, T, M Reisinger and D Streitz (2020), ‘DP15549 Spillover Effects in Empirical Corporate Finance‘, CEPR Discussion Paper No. 15549. CEPR Press, Paris & London. https://cepr.org/publications/dp15549