Selection Bias or Treatment Effect? A Re-Examination of Russell 1000/2000 Index Reconstitution

Wei, Wei; Young, Alex

doi:10.2139/ssrn.2780660

Cited by 27 publications

(26 citation statements)

References 27 publications

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“…If endogenous, this free-float adjustment will invalidate random index assignment (see Appendix A of Schmidt and Fahlenbrach, 2017). Indeed, Wei and Young (2017) show that there exist important ex-ante differences prior to index reconstitution between the ownership structure of firms with low index weights in the Russell 1000 and firms with high index weights in the Russell 2000. 20 do not use sharp RDD.…”

Section: Endogeneity Of Ownership Structurementioning

confidence: 99%

Shareholder bargaining power and the emergence of empty creditors

Colonnello

Efing

Zucchi

2019

Journal of Financial Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.Credit default swaps (CDSs) can create empty creditors who potentially force borrowers into inefficient bankruptcy but also reduce shareholders' incentives to default strategically. We show theoretically and empirically that the presence and the effects of empty creditors on firm outcomes depend on the distribution of bargaining power among claimholders. Firms are more likely to have empty creditors if these would face powerful shareholders in debt renegotiation. The empirical evidence confirms that more CDS insurance is written on firms with strong shareholders and that CDSs increase the bankruptcy risk of these same firms. The ensuing effect on firm value is negative.

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Section: Endogeneity Of Ownership Structurementioning

confidence: 99%

Shareholder bargaining power and the emergence of empty creditors

Colonnello

Efing

Zucchi

2019

Journal of Financial Economics

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“…There is currently a debate about how to use an RDD for causal inference with Russell index reconstitutions (e.g., Appel et al, 2016a,b;Schmidt and Fahlenbrach, 2017;Crane et al, 2016;Young, 2018;Wei and Young, 2017). Issues include: (a) the bandwidth choice, (b) which investors are assumed to be affected (e.g., mutual funds that specifically index Russell vs. quasiindexers), and (c) the fact that the proprietary May end market cap that Russell uses to assign index membership (the forcing variable) is not observable to researchers.…”

Section: Introductionmentioning

confidence: 99%

How does quasi-indexer ownership affect corporate tax planning?

Chen

Huang

et al. 2019

Journal of Accounting and Economics

127

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at Dallas. We thank Russell Investments for providing index membership data, Audra Boone, Matias Cattaneo, Jason Chao and Joshua White for help with the implementation of the regression discontinuity analysis, Brian Bushee for sharing the data on the classification of institutional investor types online, and Scott Dyreng for sharing the foreign tax haven data online. We are grateful to the following board member, tax professional, and asset management professionals for sharing their insights:

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“…To resolve the endogeneity concern, we employ a regression discontinuity (RD) design with Russell indexes. Recent papers, however, point out some endogeneity concerns and challenges for the identification strategy due to Russell's policy that determines index memberships and weights (Crane et al, 2016;Appel et al, 2018;GloBner, 2018;Wei and Young, 2018). After membership is determined by the end-of-May market capitalization, stocks within indexes are adjusted to include only those shares available to the public, referred to as "free float."…”

Section: Controlling For Endogeneity Of Local Ownershipmentioning

confidence: 99%

“…This creates some endogeneity issues for the identification strategy. See, for example, Appel et al (2016Appel et al ( , 2018, Crane et al (2016), GloBner (2018), and Wei and Young (2018).…”

Section: Controlling For Endogeneity Of Local Ownershipmentioning

confidence: 99%

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Local Shareholders, Corporate Community Responsibility, and Shareholder Value.

Kim¹

2020

Preprint

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This paper shows that local shareholders lead firms to engage in corporate social responsibility activities locallycorporate community responsibility (CCR). Motivated by the stakeholder theory, we find that mutual funds investing in local firms tend to increase CCR, remarkably in consumer oriented industry. Our identification strategy suggests a causal effect of local shareholders on CCR. Local shareholders and their firms employ CCR as business strategy and benefit themselves financially. Our results indicate that CCR tends to increase firm performance measured with Tobin's Q and operating cash flows, especially in the consumer-oriented industries where customer relations are critical. In addition, local shareholders (i.e. local funds) of higher CCR firms enjoy greater fund flows.

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Selection Bias or Treatment Effect? A Re-Examination of Russell 1000/2000 Index Reconstitution

Cited by 27 publications

References 27 publications

Shareholder bargaining power and the emergence of empty creditors

Shareholder bargaining power and the emergence of empty creditors

How does quasi-indexer ownership affect corporate tax planning?

Local Shareholders, Corporate Community Responsibility, and Shareholder Value.

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