Endogeneity resolution using 2SLS instrumental variable approach
| Variable | 1st stage | 2nd stage | 1st stage | 2nd stage | 1st stage | 2nd stage |
|---|---|---|---|---|---|---|
| (M1) | (M2) | (M3) | (M2) | (M3) | (M4) | |
| ESG | ROA | ESG | ROA | ESG | ROA | |
| ESG_City (IV) | 0.861*** (0.012) | – | – | – | – | – |
| ESG_Province (IV) | – | – | 0.821*** (0.026) | – | – | – |
| ESG_Industry (IV) | – | – | – | – | 0.013*** (0.003) | – |
| ESG | – | 0.138*** (0.019) | – | 0.076** (0.034) | – | 0.321*** (0.093) |
| Size | 0.013*** (0.000) | 0.007*** (0.000) | 0.014*** (0.000) | 0.008*** (0.001) | 0.015*** (0.000) | 0.328*** (0.037) |
| Lev | −0.042*** (0.002) | −0.103*** (0.002) | −0.047*** (0.002) | −0.106*** (0.003) | −0.050*** (0.002) | −0.148 (0.175) |
| CAR | 0.018*** (0.004) | 0.287*** (0.005) | 0.019*** (0.004) | 0.288*** (0.005) | 0.023*** (0.004) | 1.010*** (0.262) |
| GRW | −0.002*** (0.001) | 0.035*** (0.001) | −0.003*** (0.001) | 0.034*** (0.001) | −0.003*** (0.001) | −0.114 (0.165) |
| Age | −0.008*** (0.000) | −0.007*** (0.000) | −0.010*** (0.000) | −0.008*** (0.000) | −0.011*** (0.000) | 0.095*** (0.025) |
| B_Indp | 0.070*** (0.000) | −0.027*** (0.006) | 0.079*** (0.006) | −0.022*** (0.007) | 0.073*** (0.006) | −0.022** (0.009) |
| Bsize | 0.010*** (0.002) | 0.008*** (0.002) | 0.011*** (0.002) | 0.008*** (0.002) | 0.007*** (0.002) | 0.091* (0.055) |
| Top1 | 0.012*** (0.002) | 0.030*** (0.002) | 0.012*** (0.002) | 0.030*** (0.002) | 0.010*** (0.002) | −0.157 (0.359) |
| Duality | −0.003*** (0.008) | −0.002*** (0.001) | −0.003*** (0.001) | −0.002*** (0.001) | −0.002*** (0.001) | 0.034 (0.153) |
| Bgender | 0.010*** (0.002) | 0.010*** (0.002) | 0.012*** (0.002) | 0.011*** (0.229) | 0.011*** (0.013) | 0.018 (0.241) |
| Liq | 0.001*** (0.002) | 0.003*** (0.001) | 0.016*** (0.002) | 0.021*** (0.012) | 0.014*** (0.014) | 0.016 (0.041) |
| Constant | −0.209*** (0.011) | −0.918*** (0.042) | −0.206*** (0.020) | −0.918*** (0.002) | 0.383*** (0.007) | 0.918*** (0.042) |
| Cragg-Donald Wald | 4235.96 | 4235.963 | 1155.83 | 1155.835 | 14.98 | 14.975 |
| Kleibergen-Paap | 4802.77 | 4802.775 | 996.86 | 996.865 | 15.93 | 15.933 |
| Hansen J Statistics | – | 0.000 | – | 0.000 | – | 0.000 |
| Anderson-Rubin Wald | 0.0000 | – | 0.0277 | – | 0.0000 | – |
| Stock-wright LM | 0.0000 | – | 0.0278 | – | 0.0000 | – |
| Year FE | Yes | Yes | Yes | Yes | Yes | Yes |
| Firm FE | Yes | Yes | Yes | Yes | Yes | Yes |
| Obs | 303 | 303 | 303 | 303 | 303 | 303 |
| Variable | 1st stage | 2nd stage | 1st stage | 2nd stage | 1st stage | 2nd stage |
|---|---|---|---|---|---|---|
| (M1) | (M2) | (M3) | (M2) | (M3) | (M4) | |
| ESG | ROA | ESG | ROA | ESG | ROA | |
| ESG_City (IV) | 0.861*** (0.012) | – | – | – | – | – |
| ESG_Province (IV) | – | – | 0.821*** (0.026) | – | – | – |
| ESG_Industry (IV) | – | – | – | – | 0.013*** (0.003) | – |
| ESG | – | 0.138*** (0.019) | – | 0.076** (0.034) | – | 0.321*** (0.093) |
| Size | 0.013*** (0.000) | 0.007*** (0.000) | 0.014*** (0.000) | 0.008*** (0.001) | 0.015*** (0.000) | 0.328*** (0.037) |
| Lev | −0.042*** (0.002) | −0.103*** (0.002) | −0.047*** (0.002) | −0.106*** (0.003) | −0.050*** (0.002) | −0.148 (0.175) |
| CAR | 0.018*** (0.004) | 0.287*** (0.005) | 0.019*** (0.004) | 0.288*** (0.005) | 0.023*** (0.004) | 1.010*** (0.262) |
| GRW | −0.002*** (0.001) | 0.035*** (0.001) | −0.003*** (0.001) | 0.034*** (0.001) | −0.003*** (0.001) | −0.114 (0.165) |
| Age | −0.008*** (0.000) | −0.007*** (0.000) | −0.010*** (0.000) | −0.008*** (0.000) | −0.011*** (0.000) | 0.095*** (0.025) |
| B_Indp | 0.070*** (0.000) | −0.027*** (0.006) | 0.079*** (0.006) | −0.022*** (0.007) | 0.073*** (0.006) | −0.022** (0.009) |
| Bsize | 0.010*** (0.002) | 0.008*** (0.002) | 0.011*** (0.002) | 0.008*** (0.002) | 0.007*** (0.002) | 0.091* (0.055) |
| Top1 | 0.012*** (0.002) | 0.030*** (0.002) | 0.012*** (0.002) | 0.030*** (0.002) | 0.010*** (0.002) | −0.157 (0.359) |
| Duality | −0.003*** (0.008) | −0.002*** (0.001) | −0.003*** (0.001) | −0.002*** (0.001) | −0.002*** (0.001) | 0.034 (0.153) |
| Bgender | 0.010*** (0.002) | 0.010*** (0.002) | 0.012*** (0.002) | 0.011*** (0.229) | 0.011*** (0.013) | 0.018 (0.241) |
| Liq | 0.001*** (0.002) | 0.003*** (0.001) | 0.016*** (0.002) | 0.021*** (0.012) | 0.014*** (0.014) | 0.016 (0.041) |
| Constant | −0.209*** (0.011) | −0.918*** (0.042) | −0.206*** (0.020) | −0.918*** (0.002) | 0.383*** (0.007) | 0.918*** (0.042) |
| Cragg-Donald Wald | 4235.96 | 4235.963 | 1155.83 | 1155.835 | 14.98 | 14.975 |
| Kleibergen-Paap | 4802.77 | 4802.775 | 996.86 | 996.865 | 15.93 | 15.933 |
| Hansen J Statistics | – | 0.000 | – | 0.000 | – | 0.000 |
| Anderson-Rubin Wald | 0.0000 | – | 0.0277 | – | 0.0000 | – |
| Stock-wright LM | 0.0000 | – | 0.0278 | – | 0.0000 | – |
| Year FE | Yes | Yes | Yes | Yes | Yes | Yes |
| Firm FE | Yes | Yes | Yes | Yes | Yes | Yes |
| Obs | 303 | 303 | 303 | 303 | 303 | 303 |
Note(s): This table presents the results from the two-stage least squares (2SLS) approach used to address endogeneity issues. In the first stage (M1, M3, M5), the instrument variables (IV) for ESG are used to predict ESG scores. In the second stage (M2, M4, M6), the estimated ESG values are then regressed on corporate profitability, measured by ROA, to resolve potential endogeneity problems. ***, **, and * denote significance at the 1%, 5%, and 10% levels, respectively. Robust standard errors are reported in parentheses for all columns