Endogeneity in Accounting and Finance Research: Natural Experiments as a State‐of‐the‐Art Solution

26 Pages Posted: 3 Jun 2015

See all articles by Jennifer Kathleen Gippel

Jennifer Kathleen Gippel

Australian National University (ANU); Financial Research Network (FIRN)

Tom Smith

University of Queensland - Faculty of Business, Economics and Law; Financial Research Network (FIRN)

Yushu Zhu

University of Queensland - Business School

Multiple version iconThere are 2 versions of this paper

Date Written: June 2015

Abstract

This paper provides a discussion of endogeneity as it relates to finance and accounting research. We discuss the textbook solutions: two‐stage least squares, instrumental variables, differenced generalized method of moments (GMM) and system GMM and provide a unifying framework showing how they are related. We consider the limitations of these techniques and then detail a state‐of‐the‐art solution, utilizing a natural experiment as a way of mitigating endogeneity and building stronger theory.

Keywords: Corporate governance, Endogeneity, Natural or quasi experiment

Suggested Citation

Gippel, Jennifer Kathleen and Smith, Tom M. and Zhu, Yushu, Endogeneity in Accounting and Finance Research: Natural Experiments as a State‐of‐the‐Art Solution (June 2015). Abacus, Vol. 51, Issue 2, pp. 143-168, 2015, Available at SSRN: https://ssrn.com/abstract=2613711 or http://dx.doi.org/10.1111/abac.12048

Jennifer Kathleen Gippel (Contact Author)

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Tom M. Smith

University of Queensland - Faculty of Business, Economics and Law ( email )

4072 Brisbane, Queensland
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Yushu Zhu

University of Queensland - Business School ( email )

Blair Drive
Brisbane
Australia

HOME PAGE: http://https://www.business.uq.edu.au/staff/yushu-elizabeth-zhu

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
755
PlumX Metrics