Propensity Score Matching in Accounting Research

2016/03/01 by Jonathan E. Shipman, Quinn T. Swanquist, Quinn Thomas Swanquist +2 · 1,730 citations
Business, Management and Accounting · Mathematics · #Accounting #Accounting research #Advanced Causal Inference Techniques #Auditing, Earnings Management, Governance #Average treatment effect #Business #Computer science #Corporate Finance and Governance #Econometrics #Matching (statistics) #Mathematics #Propensity score matching #Sample (material) #Sample size determination #Statistics

paper · doi:10.2308/accr-51449

published in The Accounting Review 92(1), 213-244 (American Accounting Association)

openalex publication_date 2016/03/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/05

Abstract

ABSTRACT Propensity score matching (PSM) has become a popular technique for estimating average treatment effects (ATEs) in accounting research. In this study, we discuss the usefulness and limitations of PSM relative to more traditional multiple regression (MR) analysis. We discuss several PSM design choices and review the use of PSM in 86 articles in leading accounting journals from 2008–2014. We document a significant increase in the use of PSM from zero studies in 2008 to 26 studies in 2014. However, studies often oversell the capabilities of PSM, fail to disclose important design choices, and/or implement PSM in a theoretically inconsistent manner. We then empirically illustrate complications associated with PSM in three accounting research settings. We first demonstrate that when the treatment is not binary, PSM tends to confine analyses to a subsample of observations where the effect size is likely to be smallest. We also show that seemingly innocuous design choices greatly influence sample composition and estimates of the ATE. We conclude with suggestions for future research considering the use of matching methods. Data Availability: All data used are available from sources cited in the text.

Citations

• Litigation Risk and the Financial Reporting Credibility of Big 4 versus Non-Big 4 Audits: Evidence from Anglo-American Countries
• Dealing with limited overlap in estimation of average treatment effects
• Accruals Quality and Internal Control over Financial Reporting
• Sample Selection Bias as a Specification Error
• The central role of the propensity score in observational studies for causal effects
• Firm-Value Effects of Carbon Emissions and Carbon Disclosures

Cited by

• Do Managers Learn from Analysts about Investing? Evidence from Internal Capital Allocation
• Real Effects of a Widespread CSR Reporting Mandate: Evidence from the European Union's CSR Directive
• Algorithmic Trading and Forward‐Looking MD&A Disclosures
• Social Networks Analysis in Accounting and Finance*
• Do Audit Teams Affect Audit Production and Quality? Evidence from Audit Teams' Industry Knowledge*
• Greater Reliance on Major Customers and Auditor Going‐Concern Opinions
• The Commitment to Income‐Decreasing Accounting Choices as a Credible Signal to Reducing Information Asymmetry: The Case of Asset Revaluations*
• Female directors and managerial opportunism: Monitoring versus advisory female directors
• What influenced the lack of diversity in CSR after the company's losses: evidence from topic modeling
• The impact of U.S. economic sanctions on corporate innovation and fraud
• Effect of anti-nuclear antibody positivity with negative specific anti-extractable anti-nuclear antibodies on IVF and ICSI embryological outcomes: potential role of sperm concentration
• Stock pledging and firm risk: Evidence from India
• ICT adoption, innovation, and SMEs’ access to finance
• The Impact of Executives’ IT Expertise on Reported Data Security Breaches
• Entropy-balanced accruals
• Lead Investor Nominee in Equity Crowdfunding
• Depression Levels of State Functionaries: Empirical Evidence From China. [europepmc]
• Research on the impact of clan network on farmers' entrepreneurial income-The case of China. [europepmc]
• Value-Based Health Care: Long-Term Care Insurance for Out-of-Pocket Medical Expenses and Self-Rated Health. [europepmc]
• COVID-19 and income profile: How communities in the United States responded to mobility restrictions in the pandemic's early stages. [europepmc]
• Does Venture Capital Backing Improve Disclosure Controls and Procedures? Evidence from Management's Post-IPO Disclosures. [europepmc]
• Research on the impact of internet use on fertilizer and pesticide inputs: Empirical evidence from China. [europepmc]
• The benefits of banks' IT investments in times of trouble: evidence from loan loss accruals during the COVID-19 pandemic. [europepmc]
• Impact of urbanization on the welfare of farm households: Evidence from Adama Rural District in Oromia regional state, Ethiopia. [europepmc]
• Do fair value measurements affect accounting-based earnings quality? A literature review with a focus on corporate governance as moderator. [europepmc]
• Effect of community-based public health service on health-related quality of life among middle-aged and older adults with chronic diseases in China. [europepmc]
• How Perceived Child-Friendly Communities Alleviate Adolescents' Psychological Reactance. [europepmc]
• The impact of China's low-carbon city pilot policy on public health expenditure. [europepmc]
• Assessing the Impact of a University Transition Online Course on Student Continuation Using Statistical Matching Methods. [europepmc]
• Impact of intermittent fasting on physical activity: a national survey of Chinese residents aged 18-80 years. [europepmc]
• The impacts of various green space types on the adiposity of undergraduate students: a nationwide quasi-experimental study. [europepmc]
• Common reporting errors in subgroup analysis: a comparison of interaction and stratified regression models. [europepmc]
• The Association Between Independent Study Desk Ownership and Borderline Personality Features in Children and Adolescents in Difficulty: Findings from a Cross-Sectional Census in China [europepmc]
• Real effects of tax audits [europepmc]

Related

• SOME PRACTICAL GUIDANCE FOR THE IMPLEMENTATION OF PROPENSITY SCORE MATCHING
• Propensity Score Matching underestimates Real Treatment Effect, in a simulated theoretical multivariate model
• Propensity Score Matching: Should We Use It in Designing Observational Studies?
• Matching on the Estimated Propensity Score
• Why Propensity Scores Should Not Be Used for Matching