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Modeling and interpreting regressions with interactions

aMendoza College of Business, University of Notre Dame, Notre Dame, IN, 46556-5646, USA
bWilliams College of Business, Xavier University, 3800 Victory Parkway, Cincinnati, OH, 45207-1211, USA

Journal of Accounting Literature

ISSN: 0737-4607

Article publication date: 8 September 2018

Issue publication date: 30 June 2019

216

Abstract

This study examines the use of linear regressions that include interaction terms, finding frequent interpretation errors in published accounting research. We provide insights on how to estimate, interpret, and present interactive regression models, and explain seldom-used but easily-implemented methods to report conditional marginal effects. We also examine the use of interaction terms in tax and financial reporting trade-off studies, evaluating the conceptual fit between a regression model with interactions and alternative definitions of trade-off. Although we advocate the use of interactive models, noise levels common in accounting research greatly reduce the ability to detect interaction effects.

Keywords

Citation

Burks, J.J., Randolph, D.W. and Seida, J.A. (2019), "Modeling and interpreting regressions with interactions", Journal of Accounting Literature, Vol. 42 No. 1, pp. 61-79. https://doi.org/10.1016/j.acclit.2018.08.001

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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