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Estimating firm-level and country-level effects in cross-sectional analyses: An application of hierarchical modeling in corporate disclosure studies

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  • Dong, Minyue
  • Stettler, Alfred
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    Abstract

    Researchers in the field of international accounting are often confronted with observations of firms clustered into higher-level units such as countries. Using data from a corporate disclosure study including 797 firm observations from 34 countries, we demonstrate that the inferences obtained from the most commonly used Ordinary Least Square (OLS) test, which pools the firm and country data either under the disaggregation or aggregation approach, are problematic and misleading. To overcome the methodological limitation, we subsequently employ hierarchical modeling to simultaneously estimate both firm-level (within-country) and country-level (cross-country) disclosure determinants. We find that the clustering effects are significant in almost all firm-level variables. Once such effects are adjusted, only three firm-specific variables are significantly associated with corporate disclosure. Evidence provided by this study has important implications for most international accounting studies conducted in cross-level contexts.

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    Bibliographic Info

    Article provided by Elsevier in its journal The International Journal of Accounting.

    Volume (Year): 46 (2011)
    Issue (Month): 3 (September)
    Pages: 271-303

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    Handle: RePEc:eee:accoun:v:46:y:2011:i:3:p:271-303

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    Web page: http://www.elsevier.com/locate/inca/620179

    Related research

    Keywords: Disaggregation Aggregation Disclosure Hierarchical modeling;

    References

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    Cited by:
    1. Paolo Perego & Ans Kolk, 2012. "Multinationals’ Accountability on Sustainability: The Evolution of Third-party Assurance of Sustainability Reports," Journal of Business Ethics, Springer, vol. 110(2), pages 173-190, October.
    2. Alcalde Adriano & Lopes Fávero Luiz Paulo & Turola Takamatsu Renata, 2013. "EBITDA margin in brazilian companies. Variance decomposition and hierarchical effects," Contaduría y Administración:Revista Internacional, Accounting and Management: International Journal, vol. 58(2), pages 197-220, abril-jun.
    3. James P. Gander, 2012. "Are European Banks in Economic Harmonay? An HLM Aproach," Working Paper Series, Department of Economics, University of Utah 2012_03, University of Utah, Department of Economics.
    4. Elshandidy, Tamer & Fraser, Ian & Hussainey, Khaled, 2013. "Aggregated, voluntary, and mandatory risk disclosure incentives: Evidence from UK FTSE all-share companies," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 320-333.

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