Table 7 Estimates from 2SLS First stage...

Table 7

Estimates from 2SLS

	First stage	Second stage	First stage	Second stage	First stage	Second stage
	DV = GPR	DV = investment inefficiency	DV = GPR	DV = overinvestment	DV = GPR	DV = underinvestment
Variables	Model 1	Model 2	Model 3	Model 4	Model 5	Model 6
GTA	0.0146***		0.0001***		0.0127***
GTA	(0.000)		(0.000)		(0.000)
Pred_GPR		0.0335***		0.1050***		0.1123***
Pred_GPR		(0.007)		(0.022)		(0.039)
TANG	−0.0098***	0.0520***	−0.0223***	0.0812***	−0.0052*	0.0185***
TANG	(0.002)	(0.003)	(0.004)	(0.008)	(0.003)	(0.001)
SIZE	−0.0045***	−0.0057***	−0.0078***	−0.0152***	−0.0031***	−0.0016***
SIZE	(0.000)	(0.000)	(0.000)	(0.001)	(0.000)	(0.000)
ROA	−0.0321***	0.0778***	−0.0080*	0.0767***	−0.0470***	0.0224***
ROA	(0.006)	(0.009)	(0.014)	(0.029)	(0.007)	(0.003)
LEVE	−0.0029	0.0323***	−0.0010	0.0426***	0.0025	0.0125***
LEVE	(0.002)	(0.003)	(0.004)	(0.008)	(0.002)	(0.001)
CASH	−0.0018	0.0370***	−0.0058	0.0977***	0.0029	0.0038*
CASH	(0.004)	(0.006)	(0.007)	(0.015)	(0.005)	(0.002)
SLACK	−0.0001	0.0017***	−0.0014*	0.0093***	0.0001	0.0015***
SLACK	(0.000)	(0.000)	(0.000)	(0.002)	(0.000)	(0.000)
Ln_OC	0.0009	−0.0001	−0.0022	−0.0058**	0.0028***	0.0004
Ln_OC	(0.000)	(0.001)	(0.001)	(0.002)	(0.000)	(0.000)
ROE	0.0034*	0.0007	0.0038	−0.0005	0.0030	−0.0034***
ROE	(0.002)	(0.002)	(0.005)	(0.011)	(0.002)	(0.001)
CFO	0.0004	−0.0002	0.0185**	−0.0086	−0.0001	0.0003
CFO	(0.000)	(0.000)	(0.007)	(0.012)	(0.000)	(0.000)
Ln_Age	−0.0001	−0.0058***	0.0000	−0.0140***	−0.0002	−0.0010***
Ln_Age	(0.000)	(0.000)	(0.000)	(0.001)	(0.000)	(0.000)
TOBINSQ	0.0003	0.0014	0.0006	0.0092***	0.0000***	0.0015***
TOBINSQ	(0.000)	(0.001)	(0.000)	(0.002)	(0.000)	(0.000)
GDP_GRO	0.0154***	−0.0001	0.0147***	−0.0018**	0.0156***	−0.0016***
GDP_GRO	(0.000)	(0.000)	(0.000)	(0.001)	(0.000)	(0.001)
Intercept	4.4732***	−0.0576*	4.5316***	−0.2405**	4.4473***	−0.4250**
Intercept	(0.004)	(0.031)	(0.000)	(0.102)	(0.005)	(0.172)
Industry FE	YES	YES	YES	YES	YES	YES
Year FE	YES	YES	YES	YES	YES	YES
Observations	38,324	38,324	11,633	11,649	26,753	26,753
Adj. R2		0.0846		0.1152		0.0967
F	413.09	41.1087	291.58	40.5493	156.15	146.6132
p-value	0.000	0.000	0.000	0.000	0.000	0.000
Kleibergen-Paap rk LM statistic		254.4466		158.2647		105.8990
p-value		0.0000		0.0000		0.0000
Cragg-Donald Wald F statistic		413.0939		291.5768		156.1502
p-value		0.0000		0.0000		0.0000

	First stage	Second stage	First stage	Second stage	First stage	Second stage
	DV = GPR	DV = investment inefficiency	DV = GPR	DV = overinvestment	DV = GPR	DV = underinvestment
Variables	Model 1	Model 2	Model 3	Model 4	Model 5	Model 6
GTA	0.0146***		0.0001***		0.0127***
GTA	(0.000)		(0.000)		(0.000)
Pred_GPR		0.0335***		0.1050***		0.1123***
Pred_GPR		(0.007)		(0.022)		(0.039)
TANG	−0.0098***	0.0520***	−0.0223***	0.0812***	−0.0052*	0.0185***
TANG	(0.002)	(0.003)	(0.004)	(0.008)	(0.003)	(0.001)
SIZE	−0.0045***	−0.0057***	−0.0078***	−0.0152***	−0.0031***	−0.0016***
SIZE	(0.000)	(0.000)	(0.000)	(0.001)	(0.000)	(0.000)
ROA	−0.0321***	0.0778***	−0.0080*	0.0767***	−0.0470***	0.0224***
ROA	(0.006)	(0.009)	(0.014)	(0.029)	(0.007)	(0.003)
LEVE	−0.0029	0.0323***	−0.0010	0.0426***	0.0025	0.0125***
LEVE	(0.002)	(0.003)	(0.004)	(0.008)	(0.002)	(0.001)
CASH	−0.0018	0.0370***	−0.0058	0.0977***	0.0029	0.0038*
CASH	(0.004)	(0.006)	(0.007)	(0.015)	(0.005)	(0.002)
SLACK	−0.0001	0.0017***	−0.0014*	0.0093***	0.0001	0.0015***
SLACK	(0.000)	(0.000)	(0.000)	(0.002)	(0.000)	(0.000)
Ln_OC	0.0009	−0.0001	−0.0022	−0.0058**	0.0028***	0.0004
Ln_OC	(0.000)	(0.001)	(0.001)	(0.002)	(0.000)	(0.000)
ROE	0.0034*	0.0007	0.0038	−0.0005	0.0030	−0.0034***
ROE	(0.002)	(0.002)	(0.005)	(0.011)	(0.002)	(0.001)
CFO	0.0004	−0.0002	0.0185**	−0.0086	−0.0001	0.0003
CFO	(0.000)	(0.000)	(0.007)	(0.012)	(0.000)	(0.000)
Ln_Age	−0.0001	−0.0058***	0.0000	−0.0140***	−0.0002	−0.0010***
Ln_Age	(0.000)	(0.000)	(0.000)	(0.001)	(0.000)	(0.000)
TOBINSQ	0.0003	0.0014	0.0006	0.0092***	0.0000***	0.0015***
TOBINSQ	(0.000)	(0.001)	(0.000)	(0.002)	(0.000)	(0.000)
GDP_GRO	0.0154***	−0.0001	0.0147***	−0.0018**	0.0156***	−0.0016***
GDP_GRO	(0.000)	(0.000)	(0.000)	(0.001)	(0.000)	(0.001)
Intercept	4.4732***	−0.0576*	4.5316***	−0.2405**	4.4473***	−0.4250**
Intercept	(0.004)	(0.031)	(0.000)	(0.102)	(0.005)	(0.172)
Industry FE	YES	YES	YES	YES	YES	YES
Year FE	YES	YES	YES	YES	YES	YES
Observations	38,324	38,324	11,633	11,649	26,753	26,753
Adj. R2		0.0846		0.1152		0.0967
F	413.09	41.1087	291.58	40.5493	156.15	146.6132
p-value	0.000	0.000	0.000	0.000	0.000	0.000
Kleibergen-Paap rk LM statistic		254.4466		158.2647		105.8990
p-value		0.0000		0.0000		0.0000
Cragg-Donald Wald F statistic		413.0939		291.5768		156.1502
p-value		0.0000		0.0000		0.0000

Note(s): This table estimates 2SLS by employing growth rate of terrorist attacks (GTA) as an instrument variable for geopolitical risk. In the first stage, GPR is regressed on GTA alongside all relevant control variables to account for potential endogeneity. To assess the validity and relevance of the instrument, we conduct standard diagnostic tests. The Kleibergen-Paap rk LM statistic yields a p-value of 0.000, confirming the relevance of the instrument, while the Cragg-Donald Wald F statistic is statistically significant, mitigating concerns regarding weak identification. In the second stage, the predicted values of GPR (Pred_GPR) obtained from the first stage are used to estimate the baseline equations. All models employing pooled panel OLS estimation. Robust standard errors in brackets are clustered by firm and year to address serial correlation and heteroskedasticity. The measurement of the variables is in Appendix Table A1. *, **, and *** indicate significance levels of 10%, 5%, and 1%, respectively

Source(s): Authors own work

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