On the Use of Instrumental Variables in Accounting Research

@article{Larcker2010OnTU,
  title={On the Use of Instrumental Variables in Accounting Research},
  author={David F. Larcker and T. Rusticus},
  journal={Journal of Accounting and Economics},
  year={2010},
  volume={49},
  pages={186-205}
}
  • David F. Larcker, T. Rusticus
  • Published 2010
  • Economics
  • Journal of Accounting and Economics
  • Instrumental variable (IV) methods are commonly used in accounting research (e.g., earnings management, corporate governance, executive compensation, and disclosure research) when the regressor variables are endogenous. While IV estimation is the standard textbook solution to mitigating endogeneity problems, the appropriateness of IV methods in typical accounting research settings is not obvious. Drawing on recent advances in statistics and econometrics, we identify conditions under which IV… CONTINUE READING
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