Addressing Unobserved Selection Bias in Accounting Studies: The Bias Minimization Method
European Accounting Review 27(1), pp. 173-183, 2018
Posted: 23 Feb 2018 Last revised: 19 Dec 2018
Date Written: February 16, 2018
This note explains the minimum-biased estimator (MBE), which accounting researchers can use to analyze the robustness of regression or propensity score-matched treatment estimates to unobserved selection (endogeneity) bias. Based on the principles of the Heckman treatment model, the MBE entails estimating matched treatment effects within a range of propensity scores that minimizes unobserved selection bias. A major advantage of the MBE is that an instrumental variable is not required. The potential utility of the MBE in accounting studies is highlighted, and a familiar empirical illustration is provided.
Keywords: Unobserved (endogenous) selection bias, propensity score matching, bias minimization method, Heckman treatment model, empirical illustration
JEL Classification: C10, C21, M40, M41
Suggested Citation: Suggested Citation