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Structural Breaks in Financial Panel Data

In: Encyclopedia of Finance

Author

Listed:
  • Yiannis Karavias

    (University of Birmingham)

Abstract

The purpose of this chapter is to review recently developed methods for analyzing structural breaks in panel data. Structural breaks are caused by events that change the parameters of economic and financial models, such as the 2007–2008 financial crisis and the COVID-19 crisis. If not correctly accounted for they lead to an invalid inference. It is not always clear if a significant event has affected a particular economic model or relationship, or the date on which the relationship suffered the change. Answers to these questions can only be given through formal econometric analysis. This chapter reviews methods for both detecting and dating structural breaks. Furthermore, the usefulness of structural break method is demonstrated in examining trade credit determinants in a panel of small and medium European enterprises. A structural break was detected and dated in the year 2010. Before the break, firm profitability, sales growth, and bank loans all contributed to an increase in trade credit. After the break, the bank loans’ effect was significantly reduced, providing evidence that the trade credit’s redistribution channel collapsed after the 2007–2008 financial crisis.

Suggested Citation

  • Yiannis Karavias, 2022. "Structural Breaks in Financial Panel Data," Springer Books, in: Cheng-Few Lee & Alice C. Lee (ed.), Encyclopedia of Finance, edition 0, chapter 93, pages 2213-2228, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-91231-4_95
    DOI: 10.1007/978-3-030-91231-4_95
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    More about this item

    Keywords

    Panel data; Structural change; Cross-section dependence; Structural break; Trade credit; Financial crisis;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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