A Comment on the Practice of the Arellano-Bond/Blundell-Bond Generalized Method of Moments Estimator in IS Research

As a quick econometric solution to handle potential endogeneity issues in panel data models, the Arellano-Bond/Blundell-Bond generalized method of moments (GMM) estimator continues gain popularity IS research. Despite this estimator’s sensitivity model specifications and estimation strategies, noticeable number studies that have employed failed report detailed specifications, robustness check results with different or test statistics, which render their empirical less credible. Using simulated real data, we empirically demonstrate passing commonly required tests, such as m2 Sargan/Hansen test, does not guarantee estimate’s validity because its size statistical significance can largely depend on procedure moment restrictions researchers choose. We urge only significant focal variables but also explicitly discuss strategies provide checks along complete results.