Table 4

Mediation analysis – corporate culture, managerial ability, and earnings management

Panel A: Baron and Kenny's (1986) causal step regression – Mediating role of managerial ability (direct approach)
DAQM_AbilityDAQDAQ
(1)(2)(3)(4)
zCULTURE−0.0550***0.0156*** −0.0647***
(0.0057)(0.0008) (0.0057)
M_Ability  0.5783***0.6211***
  (0.0372)(0.0373)
All controlsYesYesYesYes
Constant−2.8247***−0.0706***−2.8421***−2.7808***
(0.0720)(0.0104)(0.0717)(0.0717)
Y/F/I/S FEYesYesYesYes
Observations34,02134,02134,02134,021
Adjusted R20.19780.10430.20130.2043
Panel B: Mediating role of managerial ability (indirect path analysis)
zCULTURE → M_Ability → DAQ
Sobel test, p-valueZ = 5.7201, p < 0.001
Aroian test, p-valueZ = 2.1654, p < 0.05
Goodman test, p-valueZ = 2.1459, p < 0.05

Note(s): This table examines the mediating role of managerial ability. Panel A reports results from Baron and Kenny's (1986) causal step regressions, where DAQ is the dependent variable and M_Ability is the mediator. Panel B presents Sobel, Aroian, and Goodman test results for the indirect effect of zCULTURE on DAQ through managerial ability. Standard errors in parentheses. *, *, and *** denote 10%, 5%, and 1% significance, respectively. All models include year, firm, industry, and state fixed effects

Source(s): The authors
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