Control Variables in Interactive Models

20 Pages Posted: 10 Nov 2021 Last revised: 2 Mar 2023

See all articles by Ed deHaan

Ed deHaan

Stanford Graduate School of Business

James Moon

Georgia Institute of Technology - Scheller College of Business

Jonathan E. Shipman

University of Arkansas

Quinn Thomas Swanquist

University of Alabama - Culverhouse School of Accountancy

Robert Lowell Whited

North Carolina State University

Date Written: March 1, 2023

Abstract

Accounting studies often examine whether the relation between X and Y varies with a moderating variable, M, by including an interactive term, X×M, in a regression. We provide plain-English guidance on why, how, and when to use control variables, Z, in interaction tests. A simulation and simple descriptions demonstrate how interacted controls affect coefficient estimates and interpretations. In particular, we demonstrate how including Z without an accompanying interaction of X×Z or M×Z generally does not eliminate the confounding effect of Z on X×M. We conclude with guidance for future research.

Keywords: Accounting Research, Interactions, Control Variables

JEL Classification: M40,M41,M42,C01

Suggested Citation

deHaan, Ed and Moon, James and Shipman, Jonathan E. and Swanquist, Quinn Thomas and Whited, Robert Lowell, Control Variables in Interactive Models (March 1, 2023). Georgia Tech Scheller College of Business Research Paper No. 3959861, Available at SSRN: https://ssrn.com/abstract=3959861 or http://dx.doi.org/10.2139/ssrn.3959861

Ed DeHaan

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, 94305
United States

James Moon (Contact Author)

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Jonathan E. Shipman

University of Arkansas ( email )

Business Bldg. 454
Fayetteville, AR 72701
United States

Quinn Thomas Swanquist

University of Alabama - Culverhouse School of Accountancy ( email )

Tuscaloosa, AL 35487
United States

Robert Lowell Whited

North Carolina State University ( email )

Raleigh, NC 27695
United States

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