Using and Interpreting Fixed Effects Models

ABSTRACT Fixed effects (FE) have emerged as a ubiquitous and powerful tool for eliminating unwanted variation in observational accounting studies. Unwanted variation is plentiful in accounting research because we often use rich data to test precise hypotheses derived from theories. By eliminating un...

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Veröffentlicht in:Journal of accounting research Jg. 62; H. 4; S. 1183 - 1226
Hauptverfasser: BREUER, MATTHIAS, DEHAAN, ED
Format: Journal Article
Sprache:Englisch
Veröffentlicht: Chicago Blackwell Publishing Ltd 01.09.2024
Schlagworte:
Econometrics
fixed effects
Research methodology
research methods
Statistical analysis
Variables
ISSN:0021-8456, 1475-679X
Online-Zugang:Volltext
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Zusammenfassung:ABSTRACT Fixed effects (FE) have emerged as a ubiquitous and powerful tool for eliminating unwanted variation in observational accounting studies. Unwanted variation is plentiful in accounting research because we often use rich data to test precise hypotheses derived from theories. By eliminating unwanted variation, FE reduce concerns that omitted variables bias our estimates or weaken test power. FE are not costless, though, so their use should be carefully justified by theoretical and institutional considerations. FE also transform samples and variables in ways that are not immediately apparent, and in doing so affect how we should interpret regression results. This primer explains the mechanics of FE and provides practical guidance for the informed use, transparent reporting, and careful interpretation of FE models.
Bibliographie:ObjectType-Article-1
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ISSN:0021-8456
1475-679X
DOI:10.1111/1475-679X.12559