Shock-Based Causal Inference in Corporate Finance and Accounting Research

Shock-Based Causal Inference in Corporate Finance and Accounting Research

Vladimir Atanasov, Bernard Black

Series number :

Serial Number: 

Date posted :

March 01 2015

Last revised :

April 13 2015
SSRN Share


  • causal inference • 
  • shock-based research design • 
  • natural experiments • 
  • legal shock • 
  • difference-in-differences • 
  • Regression Discontinuity • 
  • instrumental variables • 
  • event study • 
  • covariate balance

We study shock-based methods for credible causal inference in corporate finance research. We focus on corporate governance research, survey 13,461 papers published between 2001 and 2011 in 22 major accounting, economics, finance, law, and management journals; and identify 863 empirical studies in which corporate governance is associated with firm value or other characteristics.

We classify the methods used in these studies and assess whether they support a causal link between corporate governance and firm value or another outcome. Only a small minority have convincing causal inference strategies. The convincing strategies largely rely on external shocks ? usually from legal rules ? to generate natural experiments. We examine the 75 shock-based papers and provide a guide to shock-based research design, which stresses the common features across different designs and the value of using combined designs.

Published in

Published in: 
Publication Title: 
Critical Finance Review
2016, vol. 5, pp. 207-304


Real name:
Vladimir Atanasov
Fellow, Research Member
Northwestern University Law School and Kellogg School of Management Law School