Beyond Random Assignment: Credible Inference and Extrapolation in Dynamic Economies

• 成果类型: Article
• 署名作者: Hennessy, Christopher A.; Strebulaev, Ilya A.
• 署名单位: Centre for Economic Policy Research - UK; University of London; London Business School; University of London; London Business School; Stanford University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12862
• 发表日期: 2020
• 页码: 825-866
• 关键词: investment tax incentives; capital structure; debt; REFORM; POLICY; FIRMS; ACT

摘要

We derive analytical relationships between shock responses and theory-implied causal effects (comparative statics) in dynamic settings with linear profits and linear-quadratic stock accumulation costs. For permanent profitability shocks, responses can have incorrect signs, undershoot, or overshoot depending on the size and sign of realized changes. For profitability shocks that are i.i.d., uniformly distributed, binary, or unanticipated and temporary, there is attenuation bias, which exceeds 50% under plausible parameterizations. We derive a novel sufficient condition for profitability shock responses to equal causal effects: martingale profitability. We establish a battery of sufficient conditions for correct sign estimation, including stochastic monotonicity. Simple extrapolation/error correction formulas are presented.