Causality redux: The evolution of empirical methods in accounting research and the growth of quasi-experiments

Armstrong, Christopher; Kepler, John D.; Samuels, Delphine; Taylor, Daniel J.

doi:10.1016/j.jacceco.2022.101521

Cited by 78 publications

(25 citation statements)

References 117 publications

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“…Our findings are not without caveats. Despite our best efforts to triangulate quasi‐experimental evidence (e.g., external shocks to independent analyst coverage) with nonexperimental tests (e.g., cross‐sectional variation in independent analyst coverage), we do not observe the data generation process (Armstrong et al., 2022). Hence, while the triangulation of evidence provides us with some confidence that the negative relation between independent analyst coverage and earnings management can be interpreted as independent analysts being more effective than brokerage analysts in monitoring financial reporting and deterring earnings management, we cannot fully rule out all alternative explanations.…”

Section: Discussionmentioning

confidence: 91%

“…This evidence helps to provide more confidence that our prior results are consistent with more independent analysts driving the reduction in discretionary accruals surrounding the Global Settlement, rather than independent analysts choosing to cover firms with lower levels of discretionary accruals. A caveat should, however, be noted that since we cannot directly observe the data generation process, even with a quasi-natural experiment design, we cannot fully rule out all alternative explanations (Armstrong et al, 2022).…”

Section: Introductionmentioning

confidence: 99%

“…Although one might argue that evidence based on quasi‐natural experiments is superior to association tests in terms of internal validity, quasi‐natural experiments tend to restrict empirical analyses to smaller datasets than association tests, casting doubt on external validity. Therefore, we use both association tests and a quasi‐natural experiment to examine our research question (Armstrong et al., 2022).…”

Section: Introductionmentioning

confidence: 99%

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Analyst independence and earnings management

Huang

Jeanjean

Lui

2022

Business Fin & Account

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We examine whether analyst independence contributes to analysts’ monitoring role in deterring accruals earnings management. We first report a negative association between earnings management and the ratio of independent analysts to brokerage analysts covering a firm. Next, through the lens of the promotion of independent sell‐side research institutions by the 2003 Global Research Analyst Settlement, we document a significant decrease in earnings management on firms affected by the Global Settlement's mandate for time‐limited support to back independent research institutions. Additionally, we find that, as the aforementioned support ended, the extent of monitoring effectiveness reverted to a level indistinguishable from that before the Global Settlement. Finally, using closures and mergers of independent research institutions as a quasi‐natural experiment, we provide corroborating evidence consistent with analyst independence leading to more effective monitoring.

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Section: Discussionmentioning

confidence: 91%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Analyst independence and earnings management

Huang

Jeanjean

Lui

2022

Business Fin & Account

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“…To very briefly summarize, Armstrong, Kepler, Samuels and Taylor (2022;henceforth AKST) start from the observation that there is a rising trend towards studies drawing causal inferences in the accounting literature. AKST review the empirical accounting literature in the top-3 journals to document this trend and provide descriptive evidence of the methods that accounting researchers use to draw causal inferences.…”

Section: Introductionmentioning

confidence: 99%

“…

Armstrong et al (2022) review the empirical methods used in the accounting literature to draw causal inferences. They document a growing number of studies using quasi-experimental methods and provide a critical perspective on this trend as well as the use of these methods in the accounting literature.

…”

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confidence: 99%

Towards a design-based approach to accounting research

Leuz

2022

Journal of Accounting and Economics

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Does mandating ESG reporting reduce ESG decoupling? Evidence from the European Union's Directive 2014/95

Aboud,

Saleh,

Eliwa

2023

Bus Strat Env

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This paper investigates the impact of Directive 2014/95 (hereafter, ‘the Directive’) issued by the European Union (EU) that mandates the disclosure of ESG information on ESG decoupling behaviour by EU‐listed firms and whether the strength of national enforcement systems of member states plays a moderating role in this relationship. Using a difference‐in‐differences design and employing a propensity score matched sample of 3020 firm‐year observations from the EU and the United States, we find that both the passage of the Directive in 2014 and the implementation of the Directive in 2017 have a mitigating effect on ESG decoupling. We also find that the strength of national enforcement systems has no impact on the relationship between the Directive and ESG decoupling. Furthermore, our additional analysis indicates that the effect of the Directive is less pronounced for firms that have their ESG information independently audited. Additionally, we find that the impact of the Directive is more pronounced for firms operating in non‐controversial industry sectors. While the Directive is under ongoing revision by the EU Parliament and Commission to be replaced by the new Corporate Sustainability Reporting Directive (CSRD), our study provides timely insights into the effectiveness of the Directive and its impact on ESG information.

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Causality redux: The evolution of empirical methods in accounting research and the growth of quasi-experiments

Cited by 78 publications

References 117 publications

Analyst independence and earnings management

Analyst independence and earnings management

Towards a design-based approach to accounting research

Does mandating ESG reporting reduce ESG decoupling? Evidence from the European Union's Directive 2014/95

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