Signaling, instrumentation, and CFO decision-making

• 成果类型: Article
• 署名作者: Hennessy, Christopher A.; Chemla, Gilles
• 署名单位: University of London; London Business School; Centre for Economic Policy Research - UK; Imperial College London; University of London; London Business School; Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.07.014
• 发表日期: 2022
• 页码: 849-863
• 关键词: selection; iv; RD; experiments; Causal effect

摘要

Building parable economies embedding econometricians, we view alternative estimators (Instrumental variables, fuzzy regression discontinuity, natural experiments, OLS, event studies) from the perspective of privately informed decision-makers, e.g., CFOs. Instrumental variable estimates can be misleading since randomization through observable instruments eliminates signal content arising from discretion. If the goal is informing discretionary decisions, rather than predicting outcomes after forced/mistaken actions, instrumentation is problematic, whereas OLS or event studies can be sufficient. The analysis shows that the utility of alternative estimators hinges upon often neglected assumptions about agent/econometrician information sets, as distinct from exclusion restrictions. We recommend parable economy estimation before real-world IV estimation. (c) 2021 Published by Elsevier B.V.