Instrumental Variables Analysis and the Role of National Culture in Corporate Finance

Financial Management, Forthcoming

60 Pages Posted: 24 Sep 2018

See all articles by Robert C. Nash

Robert C. Nash

Wake Forest University

Ajay Patel

Wake Forest University, School of Business

Date Written: September 6, 2018

Abstract

In this article, we identify and review instrumental variables used to study the relation between national culture and finance. Recognizing that an effective instrument must be correlated with the endogenous variable (relevance condition) and must not be correlated with the outcome variable (exclusion condition), we conduct analysis and provide theoretical arguments to ascertain the ability of each candidate instrument to meet these criteria. We further document where to locate the data to form the actual instruments. Overall, we design this study to help future authors weigh the strengths and weaknesses of using specific instruments and to better inform empirical strategies for addressing the endogeneity concerns inherent in the “culture and finance” literature.

Keywords: National Culture, Instrumental Variables

JEL Classification: C26, C8, A12, Z13

Suggested Citation

Nash, Robert C. and Patel, Ajay, Instrumental Variables Analysis and the Role of National Culture in Corporate Finance (September 6, 2018). Financial Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3245283

Robert C. Nash (Contact Author)

Wake Forest University ( email )

2601 Wake Forest Road
Winston-Salem, NC 27109
United States

Ajay Patel

Wake Forest University, School of Business ( email )

1834 Wake Forest Road
Building 60, Farrell Hall
Winston-Salem, NC 27106
United States
336-758-5575 (Phone)
336-758-4514 (Fax)

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