Table 7.

3SLS regressions between the risk measures and social performance measures

	voldw	Str	Con	IV4ffdw	Str	Con	betad4ffw	Str	Con
Risk		−0.015***	0.010***		−0.016***	0.005		0.000	−0.002**
		(−4.24)	(3.71)		(−3.99)	(1.46)		(0.22)	(−2.10)
Str	0.172	0.684***	−0.039***	0.181*	0.684***	−0.039***	0.268	0.685***	−0.039***
	(1.47)	(106.35)	(−7.54)	(1.78)	(106.32)	(−7.62)	(0.71)	(106.43)	(−7.56)
Con	0.036	0.068***	0.456***	0.075	0.067***	0.457***	−0.267	0.068***	0.457***
	(0.62)	(8.76)	(73.03)	(1.50)	(8.58)	(73.04)	(−1.44)	(8.71)	(73.06)
Str_crisis	−0.423***			−0.391***			−0.470**
	(−6.12)			(−6.53)			(−2.10)
Str_postcrisis	−0.156			−0.151*			−0.275
	(−1.57)			(−1.75)			(−0.85)
Con_crisis	0.244***			−0.009			0.001
	(5.28)			(−0.22)			(0.01)
Con_postcrisis	0.025			−0.092**			−0.203
	(0.53)			(−2.22)			(−1.31)
lnmkteq	−0.046***	0.008***	0.009***	−0.049***	0.007***	0.008***	−0.015***	0.008***	0.008***
	(−26.17)	(9.20)	(13.15)	(−32.14)	(8.95)	(12.64)	(−2.62)	(10.30)	(12.61)
bmw	0.017***	0.009***	0.007***	0.007***	0.008***	0.007***	−0.011	0.008***	0.007***
	(5.77)	(5.58)	(5.93)	(2.73)	(5.51)	(6.07)	(−1.16)	(5.29)	(5.74)
netlevw	0.034***	0.001*	0.002***	0.033***	0.001**	0.002***	0.015***	0.001	0.002***
	(29.53)	(1.88)	(3.60)	(33.49)	(2.02)	(4.13)	(4.12)	(0.80)	(4.04)
rmedinfw	0.140***	0.096***	0.012	0.126***	0.097***	0.014	0.297***	0.093***	0.013
	(5.44)	(7.53)	(1.18)	(5.64)	(7.62)	(1.36)	(3.56)	(7.27)	(1.26)

	voldw	Str	Con	IV4ffdw	Str	Con	betad4ffw	Str	Con
avgturdw	0.030***	0.003***	0.001***	0.024***	0.003***	0.001***	0.017***	0.002***	0.002***
	(47.97)	(8.99)	(4.29)	(43.53)	(8.74)	(5.05)	(8.06)	(8.17)	(6.27)
cvturdw	0.995***	−0.005	−0.021	1.463***	0.006	−0.017	−1.631***	−0.015	−0.013
	(23.27)	(−0.25)	(−1.29)	(39.45)	(0.30)	(−1.00)	(−11.80)	(−0.76)	(−0.81)
dispeps1w	0.081***	−0.006	0.011***	0.064***	−0.006	0.011***	0.026	−0.007*	0.011***
	(10.55)	(−1.52)	(3.54)	(9.56)	(−1.54)	(3.66)	(1.05)	(−1.94)	(3.64)
investmentw	0.046***	−0.003	−0.003	0.044***	−0.003	−0.002	0.152***	−0.005	−0.004
	(3.29)	(−0.50)	(−0.56)	(3.66)	(−0.43)	(−0.42)	(3.36)	(−0.81)	(−0.71)
expgrthw	0.030***	−0.004	−0.008***	0.019***	−0.004	−0.008***	0.001	−0.005	−0.008***
	(4.09)	(−0.99)	(−2.84)	(2.87)	(−1.05)	(−2.75)	(0.03)	(−1.29)	(−2.84)
zscorew	0.002***	−0.000***	−0.000***	0.002***	−0.000***	−0.000***	0.003***	−0.000***	−0.000***
	(9.50)	(−3.98)	(−4.28)	(8.54)	(−4.01)	(−4.02)	(4.01)	(−4.47)	(−3.99)
sdroa5yw	0.327***	0.006	0.025***	0.254***	0.005	0.027***	0.298***	0.001	0.030***
	(15.60)	(0.64)	(3.17)	(13.99)	(0.54)	(3.49)	(4.40)	(0.07)	(3.83)
inv_basew	−0.039***	−0.008***	−0.005**	−0.024***	−0.008***	−0.005**	−0.038**	−0.008***	−0.005**
	(−7.11)	(−3.26)	(−2.33)	(−5.11)	(−3.18)	(−2.45)	(−2.14)	(−3.01)	(−2.53)
Constant	0.130***	−0.004	0.001	0.042***	−0.003	−0.006***	0.044***	−0.005**	−0.005***
	(28.48)	(−1.64)	(0.42)	(10.58)	(−1.52)	(−3.11)	(2.95)	(−2.47)	(−2.73)
Firm fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Year fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Observations	18,994	18,994	18,994	18,994	18,994	18,994	18,994	18,994	18,994
R squared	0.645	0.501	0.424	0.584	0.501	0.424	0.026	0.500	0.424
F statistic p value	0	0	0	0	0	0	0	0	0
p value (Str + Str_crisis)	0.000			0.000			0.456
p value (Str + Str_postcrisis)	0.482			0.130			0.921
p value (Con + Con_crisis)	0.000			0.062			0.044
p value (Con + Con_postcrisis)	0.025			0.456			0.000

Table 7 report results from the 3SLS regressions of the simultaneous equations system where the dependent variables are the risk, strengths, and concerns measures over the period 1991–2012. The simultaneous system of equations estimated using three-stage-least squares (3SLS) with all terms defined in Table 1 is

${\text{Str}}_{it}={\mathit{\beta }}_0+{\mathit{\lambda }}_1{\text{Risk}}_{it-1}+{\mathit{\pi }}_1{\text{Str}}_{it-1}+{\mathit{\phi }}_1{\text{Con}}_{it-1}+\mathit{\theta }{X}_{it-1}+{\mathit{\gamma }}_i+{\mathit{\eta }}_t+{\mathit{\omega }}_{it}$

${\text{Con}}_{it}={\mathit{\upsilon }}_0+{\mathit{\lambda }}_2{\text{Risk}}_{it-1}+{\mathit{\pi }}_2{\text{Str}}_{it-1}+{\mathit{\phi }}_2{\text{Con}}_{it-1}+\mathit{\delta }{X}_{it-1}+{\mathit{\gamma }}_i+{\mathit{\eta }}_t+{\mathit{\mu }}_{it}$

$\begin{array}{c}\hfill {\text{Risk}}_{it}={\mathit{\alpha }}_0+{\mathit{\alpha }}_{11}{\text{Str}}_{it}+{\mathit{\alpha }}_{12}{\text{Str}}_{it}\times {\text{Crisis}}_{it}+{\mathit{\alpha }}_{13}{\text{Str}}_{it}\times {\text{PostCrisis}}_{it}+{\mathit{\alpha }}_{21}{\text{Con}}_{it}\\ \hfill +{\mathit{\alpha }}_{22}{\text{Con}}_{it}\times {\text{Crisis}}_{it}+{\mathit{\alpha }}_{23}{\text{Con}}_{it}\times {\text{PostCrisis}}_{it}+\mathit{\psi }{X}_{it}+{\mathit{\gamma }}_i+{\mathit{\eta }}_t+{\mathit{\epsilon }}_{it}\\ \hfill \end{array}$

We first remove the fixed effects from all variables, including dependent and independent variables. This is achieved by demeaning all the variables, i.e., for every company, we subtract the mean value of the variable across time from each observation. Then, we estimate the system of equations using the 3SLS method applied on the demeaned variables. We also included time dummies in all equations. The p value (Str + Str_crisis) is the p value of the test statistic that the sum of the coefficients associated with Str and Str_crisis is not statistically different from zero. The p value (Str + Str_postcrisis) is the p value of the test statistic that the sum of the coefficients associated with Str and Str_postcrisis is not statistically different from zero. The p value (Con + Con_crisis) is the p value of the test statistic that the sum of the coefficients associated with Con and Con_crisis is not statistically different from zero. The p value (Con + Con_postcrisis) is the p value of the test statistic that the sum of the coefficients associated with Con and Con_postcrisis is not statistically different from zero. All variables are defined in Table 1. Robust t statistics are reported in the parentheses

*** Significant at the 1 % level (p < 0.01); ** Significant at the 5 % level (p < 0.05); * Significant at the 10 % level (p < 0.1)