The Definition of Channel and Mechanism The purpose of causal inference: The relationship between financial variables. The foundation:Financial theories. To understand Causal effect.The financial theory determines the Causal effect. Exploring the channel and mechanism can help ensure unconfoundedness. Why?If the Causal effect originates from the differences in unobservable covariates,what will happen when we explore the channel and mechanism? Consumer coupon and consumer spending. 6
• The purpose of causal inference: • The relationship between financial variables. • The foundation: Financial theories. • To understand Causal effect. The financial theory determines the Causal effect. • Exploring the channel and mechanism can help ensure unconfoundedness. • Why? If the Causal effect originates from the differences in unobservable covariates, what will happen when we explore the channel and mechanism? • Consumer coupon and consumer spending. 6 The Definition of Channel and Mechanism
The Definition of Channel and Mechanism Further application: Insider trading and stock returns-information processing and stock returns. Bank competition and financial constraints-Fund accessibility and financial constraints. Environmental court and green development-Law enforcement efforts and green development. Theoretical contributions
• Further application: • Insider trading and stock returns→ information processing and stock returns. • Bank competition and financial constraints→ Fund accessibility and financial constraints. • Environmental court and green development→ Law enforcement efforts and green development. • . • Theoretical contributions. 7 The Definition of Channel and Mechanism