Table 8.

Instrumental-variable diagnostics

ESG componentTest typeStatisticValueP-valueCritical values (Stock-Yogo)Conclusion
Environmental (E score)Under identificationKleibergen–Paap rk LM statistic26.765p < 0.01IV is relevant; model is correctly identified
Weak identificationCragg-Donald Wald F statistic37.99310%: 16.38, 15%: 8.96, 20%: 6.66, 25%: 5.53IV is not weak; exceeds critical values
Kleibergen-Paap rk Wald F statistic26.974Confirms IV strength
Social (S score)Under identificationKleibergen-Paap rk LM statistic26.765p < 0.01IV is relevant; model is correctly identified
Weak identificationCragg-Donald Wald F statistic37.99310%: 16.38, 15%: 8.96, 20%: 6.66, 25%: 5.53IV is not weak; exceeds critical values
Kleibergen-Paap rk Wald F statistic26.974Confirms IV strength
Governance (G score)Under identificationKleibergen-Paap rk LM statistic26.765p < 0.01IV is relevant; model is correctly identified
Weak identificationCragg-Donald Wald F statistic37.99310%: 16.38, 15%: 8.96, 20%: 6.66, 25%: 5.53IV is not weak; exceeds critical values
Kleibergen–Paap rk Wald F statistic26.974Confirms IV strength
Note(s):

Because the same endogenous regressor and first-stage specification are used across the environmental, social and governance models, the IV diagnostic statistics are identical across the Three ESG dimensions

Source(s): Authors’ own work

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