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

Jennifer Gippel; Tom Smith; Yushu Zhu

doi:10.1111/abac.12048

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

Jennifer Gippel, Tom Smith, Yushu Zhu

Research output: Contribution to journal › Article › peer-review

107 Citations (Scopus)

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.

Original language	English
Pages (from-to)	143-168
Number of pages	26
Journal	Abacus
Volume	51
Issue number	2
DOIs	https://doi.org/10.1111/abac.12048
Publication status	Published - 1 Jun 2015

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10.1111/abac.12048

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

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