Addressing endogeneity-IV-2SLS regression results
| First stage | Second stage | |||||||
|---|---|---|---|---|---|---|---|---|
| Variable | C_COMP | C_DUAL | C_STATUS | C_TENURE | C_DIRECTOR | Variable | NCSKEWt+1 | DUVOLt+1 |
| AVG_COMP | −10.11*** (11.2) | – | – | – | – | PREDICT_COMP | −3.12 (2.01) | −1.98 (4.56) |
| ACG_DUAL | – | −6.88*** (18.06) | – | – | – | PREDICT_DUAL | −0.15* (2.35) | −0.23** (3.12) |
| AVG_STATUS | – | – | −14.34*** (25.04) | – | – | PREDICT_STATUS | −0.55* (2.33) | −0.40 (7.61) |
| AVG_TENURE | – | – | – | −8.77*** (14.11) | – | PREDICT_TENURE | 0.09 (0.65) | 0.08 (6.43) |
| AVG_DIRECTOR | – | – | – | – | −8.21*** (24.76) | PREDICT_DIRECTOR | −0.78*** (1.29) | −0.65*** (5.61) |
| DTURNOVER | 2.12*** (1.17) | −0.05 (2.75) | −0.14 (2.13) | −0.28 (2.59) | 0.27 (0.71) | DTURNOVER | −0.03 (9.92) | 2.37*** (1.07) |
| RET | −4.58*** (3.93) | −16.77*** (3.32) | 12.36*** (1.75) | 28.15** (2.07) | 4.84*** (1.56) | RET | −65.31*** (11.28) | −10.96* (3.48) |
| M/B | −146*** (1.37) | 0.85 (13.05) | −0.13* (7.16) | −0.59 (3.19) | 0.24*** (6.54) | MB | −0.03*** (3.28) | −6.40 (1.12) |
| SIZE | −2.68*** (12.09) | −0.39 (4.15) | −0.22*** (16.38) | −0.67*** (9.41) | −0.39** (5.44) | SIZE | −0.32** (4.55) | −0.50*** (1.84) |
| LEV | 8.97*** (6.69) | 0.78*** (1.91) | 0.99*** (12.19) | 1.43 (10.7) | 0.30 (3.06) | LEV | 0.42*** (5.12) | 0.16* (2.55) |
| Constant | 6.54*** (4.77) | 9.79*** (8.86) | 7.09*** (15.31) | 45.98*** (6.15) | 5.66*** (18.73) | Constant | 4.58*** (4.61) | 0.01** (7.89) |
| N | 2,360 | 2,360 | 2,360 | 2,360 | 2,360 | N | 2,360 | 2,360 |
| R2 | 0.19 | 0.17 | 0.31 | 0.19 | 0.24 | R2 | 0.87 | 0.77 |
| Year effects | Yes | Yes | Yes | Yes | Yes | Year effects | Yes | Yes |
| Industry effects | Yes | Yes | Yes | Yes | Yes | Industry effects | Yes | Yes |
| First stage | Second stage | |||||||
|---|---|---|---|---|---|---|---|---|
| Variable | C_COMP | C_DUAL | C_STATUS | C_TENURE | C_DIRECTOR | Variable | NCSKEW | DUVOL |
| AVG_COMP | −10.11*** (11.2) | – | – | – | – | PREDICT_COMP | −3.12 (2.01) | −1.98 (4.56) |
| ACG_DUAL | – | −6.88*** (18.06) | – | – | – | PREDICT_DUAL | −0.15* (2.35) | −0.23** (3.12) |
| AVG_STATUS | – | – | −14.34*** (25.04) | – | – | PREDICT_STATUS | −0.55* (2.33) | −0.40 (7.61) |
| AVG_TENURE | – | – | – | −8.77*** (14.11) | – | PREDICT_TENURE | 0.09 (0.65) | 0.08 (6.43) |
| AVG_DIRECTOR | – | – | – | – | −8.21*** (24.76) | PREDICT_DIRECTOR | −0.78*** (1.29) | −0.65*** (5.61) |
| DTURNOVER | 2.12*** (1.17) | −0.05 (2.75) | −0.14 (2.13) | −0.28 (2.59) | 0.27 (0.71) | DTURNOVER | −0.03 (9.92) | 2.37*** (1.07) |
| RET | −4.58*** (3.93) | −16.77*** (3.32) | 12.36*** (1.75) | 28.15** (2.07) | 4.84*** (1.56) | RET | −65.31*** (11.28) | −10.96* (3.48) |
| M/B | −146*** (1.37) | 0.85 (13.05) | −0.13* (7.16) | −0.59 (3.19) | 0.24*** (6.54) | MB | −0.03*** (3.28) | −6.40 (1.12) |
| SIZE | −2.68*** (12.09) | −0.39 (4.15) | −0.22*** (16.38) | −0.67*** (9.41) | −0.39** (5.44) | SIZE | −0.32** (4.55) | −0.50*** (1.84) |
| LEV | 8.97*** (6.69) | 0.78*** (1.91) | 0.99*** (12.19) | 1.43 (10.7) | 0.30 (3.06) | LEV | 0.42*** (5.12) | 0.16* (2.55) |
| Constant | 6.54*** (4.77) | 9.79*** (8.86) | 7.09*** (15.31) | 45.98*** (6.15) | 5.66*** (18.73) | Constant | 4.58*** (4.61) | 0.01** (7.89) |
| N | 2,360 | 2,360 | 2,360 | 2,360 | 2,360 | N | 2,360 | 2,360 |
| 0.19 | 0.17 | 0.31 | 0.19 | 0.24 | 0.87 | 0.77 | ||
| Year effects | Yes | Yes | Yes | Yes | Yes | Year effects | Yes | Yes |
| Industry effects | Yes | Yes | Yes | Yes | Yes | Industry effects | Yes | Yes |
Note(s): C_COMP = CEO compensation; C_DUAL = CEO duality; C_STATUS = CEO status; C_TENURE = CEO tenure; C_DIRECTOR = CEO directorship; AVG_C_COMP = average measure for CEO compensation of companies in the same industry; AVG_C_DUAL = average measure for CEO duality for companies in the same industry; AVG_C_STATUS = average measure for CEO status for companies in the same industry; AVG_C_TENURE = average measure for CEO tenure for companies in the same industry; AVG_C_DIRECTOR = average measure for CEO directorship for companies in the same industry; PREDICTED_C_COMP = predicted value of CEO compensation as estimated in the first stage of IV-2SLS; PREDICTED_C_DUAL = predicted value of CEO duality as estimated in the first stage of IV-2SLS; PREDICTED_C_STATUS = predicted value of CEO status as estimated in the first stage of IV-2SLS; PREDICTED_C_TENURE = predicted value of CEO tenure as estimated in the first stage of IV-2SLS; PREDICTED_C_DIRECTOR = predicted value of CEO directorship as estimated in the first stage of IV-2SLS; NCSKEWt+1 = negative conditional skewness measured at t+1; DUVOLt+1 = down-to-up-volatility measured at t+1; DTURNOVER = de-trended turnover; RET = company-specific weekly returns; M/B = market to book value of equity; SIZE = size of company measured by taking the natural log of market capitalisation; LEV = leverage; AVG_C_COMP, AVG_C_DUAL, AVG_C_STATUS, AVG_C_TENURE, and AVG_C_DIRECTOR, are used as instrumental variables in the first stage of IV-2SLS model. ***, ** * indicates the level of significance at 1, 5 and 10%, respectively. t-statistics reported in the parentheses are based on robust standard errors
Source(s): Author’s calculations based on using Stata 14
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