Modeling and Interpreting Regressions with Interactions

Journal of Accounting Literature. June 2019. Volume 42: 61-79.

Posted: 8 Aug 2018 Last revised: 8 Aug 2019

See all articles by Jeffrey J. Burks

Jeffrey J. Burks

University of Notre Dame

David W. Randolph

Xavier University

Jim A. Seida

University of Notre Dame - Department of Accountancy

Date Written: September 15, 2018

Abstract

This study examines the use of linear regressions that include interaction terms, finding frequent interpretation errors in published accounting research. We provide insights on how to estimate, interpret, and present interactive regression models, and explain seldom-used but easily-implemented methods to report conditional marginal effects. We also examine the use of interaction terms in tax and financial reporting trade-off studies, evaluating the conceptual fit between a regression model with interactions and alternative definitions of trade-off. Although we advocate the use of interactive models, noise levels common in accounting research greatly reduce the ability to detect interaction effects.

Keywords: Interactive, Interaction, Trade-Off, Conditional Effect, Moderating, Tax

JEL Classification: C18, C31, H20, M40

Suggested Citation

Burks, Jeffrey J. and Randolph, David W. and Seida, Jim A., Modeling and Interpreting Regressions with Interactions (September 15, 2018). Journal of Accounting Literature. June 2019. Volume 42: 61-79., Available at SSRN: https://ssrn.com/abstract=3218570 or http://dx.doi.org/10.2139/ssrn.3218570

Jeffrey J. Burks

University of Notre Dame ( email )

Mendoza College of Business
Notre Dame, IN 46556-5646
United States

David W. Randolph

Xavier University ( email )

3800 Victory Parkway
ML 1211
Cincinnati, OH 45207
United States
5137451088 (Phone)

Jim A. Seida (Contact Author)

University of Notre Dame - Department of Accountancy ( email )

Mendoza College of Business
Notre Dame, IN 46556-5646
United States
574-631-9496 (Phone)
574-631-5255 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,258
PlumX Metrics