Erschienen in:Harvard Law School John M. Olin Center Discussion Paper ; No. 1024 (2019)
Umfang:
1 Online-Ressource (33 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.3499101
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 6, 2019 erstellt
Beschreibung:
A popular research design identifies the effects of corporate governance by (changes in) state laws, clustering standard errors by state of incorporation. Using Monte-Carlo simulations, this paper shows that conventional statistical tests based on these standard errors dramatically overreject: in a typical design, randomly generated “placebo laws” are “significant” at the 1/5/10% level 9/21/30% of the time. This poor coverage is due to the extremely unequal cluster sizes, especially Delaware's concentration of half of all incorporations. Fixes recommended in the literature fail, including degrees-of-freedom corrections and the cluster wild bootstrap. The paper proposes a permutation test for valid inference