Table 5. Second-stage IV estimates of...

Table 5.

Second-stage IV estimates of the association between firms’ inflation expectations and earnings management (accrual-based and real)

Variables	$P O S D A$	$N E G D A$
Panel A
$A C C I N F L E X P$	0.0144*** (7.962)	0.0124*** (7.771)
$L E V$	−0.00349* (−1.662)	−0.0171*** (−8.366)
$S A L E S G R$	0.0171*** (14.46)	−0.000232 (−0.197)
$S I Z E$	−0.00166*** (−11.47)	−0.00112*** (−8.127)
$L O S S$	0.00237*** (4.306)	0.00690*** (11.51)
Constant	0.0353*** (11.63)	0.0318*** (13.36)
Observations	36,309	35,755
Number of firms	2,170	2,169
Degrees of freedom	36,259	35,705
Country FE	Yes	Yes
Quarter FE	No	No
Industry FE	Yes	Yes
Kleibergen–Paap rk Wald F statistic	474.80	570.63
Endogeneity p-value	0.00	0.00
R²	0.3163	0.3425
Panel B
Variables	$A B N C F O$	$A B N P R O D$
$R E A L I N F L E X P$	−0.00524*** (−2.588)	−0.00113 (−0.607)
$L E V$	0.0105* (1.653)	−0.0102* (−2.108)
$R O A$	−0.826*** (−23.89)	−0.230*** (−9.432)
$S A L E S G R$	0.0135*** (8.818)	0.00572*** (4.231)
$S I Z E$	−0.00471*** (−9.711)	0.00238*** (5.101)
$L O S S$	−0.000363 (−0.239)	0.00362*** (2.754)
Constant	0.0333*** (3.680)	−0.0203** (−2.055)
Observations	69,196	63,553
Number of firms	2,208	2,021
Degrees of freedom	69,145	63,502
Country FE	Yes	Yes
Quarter FE	No	No
Industry FE	Yes	Yes
Kleibergen–Paap rk Wald F statistic	1,812.73	1,993.36
Endogeneity p-value	0.0006	0.4749
R²	0.2175	0.0574

Variables	$P O S D A$	$N E G D A$
Panel A
$A C C I N F L E X P$	0.0144*** (7.962)	0.0124*** (7.771)
$L E V$	−0.00349* (−1.662)	−0.0171*** (−8.366)
$S A L E S G R$	0.0171*** (14.46)	−0.000232 (−0.197)
$S I Z E$	−0.00166*** (−11.47)	−0.00112*** (−8.127)
$L O S S$	0.00237*** (4.306)	0.00690*** (11.51)
Constant	0.0353*** (11.63)	0.0318*** (13.36)
Observations	36,309	35,755
Number of firms	2,170	2,169
Degrees of freedom	36,259	35,705
Country FE	Yes	Yes
Quarter FE	No	No
Industry FE	Yes	Yes
Kleibergen–Paap rk Wald F statistic	474.80	570.63
Endogeneity p-value	0.00	0.00
R²	0.3163	0.3425
Panel B
Variables	$A B N C F O$	$A B N P R O D$
$R E A L I N F L E X P$	−0.00524*** (−2.588)	−0.00113 (−0.607)
$L E V$	0.0105* (1.653)	−0.0102* (−2.108)
$R O A$	−0.826*** (−23.89)	−0.230*** (−9.432)
$S A L E S G R$	0.0135*** (8.818)	0.00572*** (4.231)
$S I Z E$	−0.00471*** (−9.711)	0.00238*** (5.101)
$L O S S$	−0.000363 (−0.239)	0.00362*** (2.754)
Constant	0.0333*** (3.680)	−0.0203** (−2.055)
Observations	69,196	63,553
Number of firms	2,208	2,021
Degrees of freedom	69,145	63,502
Country FE	Yes	Yes
Quarter FE	No	No
Industry FE	Yes	Yes
Kleibergen–Paap rk Wald F statistic	1,812.73	1,993.36
Endogeneity p-value	0.0006	0.4749
R²	0.2175	0.0574

Note(s):

This table presents the second stage regression results on the association between firms’ inflation expectations and earnings management (accrual-based and real). The Instrumental Variable used is the surprises of the ECB $(E C B S U R P)$ ⁠. Z-statistics reported in parentheses are based on standard errors clustered by firm. The extreme values of all continuous variables are winsorized at the 1st and 99th percentiles. Definition and measurement of variables are presented in Table 1. *, ** and *** denote significance at the 10, 5 and 1% levels, respectively. All predictor variables were assessed for multicollinearity and quarter fixed effects were excluded. Variance inflation factor (VIF) values for the remaining variables are below 5, indicating no significant multicollinearity

Source(s): Authors’ own work

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