Significance Testing in Accounting Research: A Critical Evaluation Based on Evidence

23 Pages Posted: 26 Dec 2018

See all articles by Jae H. Kim

Jae H. Kim

affiliation not provided to SSRN

Kamran Ahmed

La Trobe Business School, La Trobe University

Philip Ji

Dongguk University

Multiple version iconThere are 2 versions of this paper

Date Written: December 2018

Abstract

From a survey of the papers published in leading accounting journals in 2014, we find that accounting researchers conduct significance testing almost exclusively at a conventional level of significance, without considering key factors such as the sample size or power of a test. We present evidence that a vast majority of the accounting studies favour large or massive sample sizes and conduct significance tests with the power extremely close to or equal to one. As a result, statistical inference is severely biased towards Type I error, frequently rejecting the true null hypotheses. Under the ‘p‐value less than 0.05’ criterion for statistical significance, more than 90% of the surveyed papers report statistical significance. However, under alternative criteria, only 40% of the results are statistically significant. We propose that substantial changes be made to the current practice of significance testing for more credible empirical research in accounting.

Keywords: Bayesian inference, Research credibility, Sample size, Statistical significance, Statistical power

Suggested Citation

Kim, Jae H. and Ahmed, Kamran and Ji, Philip, Significance Testing in Accounting Research: A Critical Evaluation Based on Evidence (December 2018). Abacus, Vol. 54, Issue 4, pp. 524-546, 2018, Available at SSRN: https://ssrn.com/abstract=3306742 or http://dx.doi.org/10.1111/abac.12141

Jae H. Kim (Contact Author)

affiliation not provided to SSRN

Kamran Ahmed

La Trobe Business School, La Trobe University ( email )

Kingsbury Drive
Melbourne, VIC 3086
Australia
0403038387 (Phone)
3105 (Fax)

Philip Ji

Dongguk University ( email )

Seoul
Korea, Republic of (South Korea)

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

Paper statistics

Downloads
6
Abstract Views
1,127
PlumX Metrics