“…The endogeneity problem takes place when improved valuation might drive an impact on governance measures (Durnev and Kim, 2005;Love, 2011). We follow Black et al (2014) and proceed, on the one hand, by applying panel data with fixed effect (FE) specifications to tackle the unobservable heterogeneity problem, and, on the other, by computing the governance measures at the beginning of the year and firm value at year-end in order to address the endogeneity problem. 1 Although prior research has focused on cross-sectional data, we seek to improve on these findings following Black et al (2014) and using FE as time-demeaned specification as x dm it = (x it −x i ) where x it corresponds to the vector of independent variables.…”