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

Gippel, Jennifer; Smith, Tom; Zhu, Yushu


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.

CollectionsANU Research Publications
Date published: 2015
Type: Journal article
Source: Abacus
DOI: 10.1111/abac.12048


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