02-17-2017 06:21 PM
I have a question regarding the output of my heckman model. I am testing how institutional investor presence affects firm investments. However, it has been argued that institutions choose to invest in firms based on the firm investment strategies, performance, etc.
I am proposing using a 2SLS Heckman approach to correct for this sample bias. However, I also have a simultaneity issue because what I'm really interested in is how institutional investors (dumii) affect investments (capx).
endogeneity problem: dumii = capx q lnat salesgrowth lev;
equation of interest: capx = dumii liq salesgrowth vol rec;
Would using Heckman be appropriate in this situation? If I estimate equation (1) and substitute in invese mills ratio into (2), I cannot also include "dumii" as an independent variable because it is a linear combination of thee inverse mills ratio. In this case, would the coefficient on the inverse mills ratio act as an instrumental variable for dumii? Ie: will the coefficient on lambda give me a clue as to how institutional investors affect investments?
The code I run is:
Proc qlm data=data heckit;
Model dumii = adjcapxyq q lnat salesgrowth lev / discrete; *selection equation;
Model adjcapxyq = liq salesgrowth vol rec / select(dumii=1); *equation of interest;
Thank you for your help in advance!!!