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Will the Real Specification Please Stand Up? A Comment on Andrew Bird and Stephen Karolyi

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  • Alex Young

Abstract

The present paper concerns two versions of an article by Andrew Bird and Stephen Karolyi titled “Governance and Taxes: Evidence from Regression Discontinuity.” One version is a manuscript working paper, dated September 2015; the other is the piece as published in The Accounting Review in 2017. Between the two versions, the numbers in all 11 tables stayed exactly the same (to three decimal places), so it is clear that the specifications generating the results were the same. But the description of the specifications changed. The 2015 working paper version says that, for their main results, the authors used one method of ranking firms by market capitalization, while the 2017 published version says that they used another method. Replication and investigation suggests that the working paper version accurately describes the main specification, and the published version misstates it. I conclude by demonstrating that the main result, when accurately described, fails a simple placebo test and is therefore spurious.

Suggested Citation

  • Alex Young, 2018. "Will the Real Specification Please Stand Up? A Comment on Andrew Bird and Stephen Karolyi," Econ Journal Watch, Econ Journal Watch, vol. 15(1), pages 1-35–48, January.
    • Handle: RePEc:ejw:journl:v:15:y:2018:i:1:p:35-48
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    References listed on IDEAS

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    1. David S. Lee & Thomas Lemieux, 2010. "Regression Discontinuity Designs in Economics," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 281-355, June.
    2. Michael A. Clemens, 2017. "The Meaning Of Failed Replications: A Review And Proposal," Journal of Economic Surveys, Wiley Blackwell, vol. 31(1), pages 326-342, February.
    3. Yen-Cheng Chang & Harrison Hong & Inessa Liskovich, 2015. "Regression Discontinuity and the Price Effects of Stock Market Indexing," The Review of Financial Studies, Society for Financial Studies, vol. 28(1), pages 212-246.
    4. Ian R. Appel & Todd A. Gormley & Donald B. Keim, 2016. "Standing on the Shoulders of Giants: The Effect of Passive Investors on Activism," NBER Working Papers 22707, National Bureau of Economic Research, Inc.
    5. Alan D. Crane & Sébastien Michenaud & James P. Weston, 2016. "Editor's Choice The Effect of Institutional Ownership on Payout Policy: Evidence from Index Thresholds," The Review of Financial Studies, Society for Financial Studies, vol. 29(6), pages 1377-1408.
    6. Anna, Petrenko, 2016. "Мaркування готової продукції як складова частина інформаційного забезпечення маркетингової діяльності підприємств овочепродуктового підкомплексу," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 2(1), March.
    7. Appel, Ian R. & Gormley, Todd A. & Keim, Donald B., 2016. "Passive investors, not passive owners," Journal of Financial Economics, Elsevier, vol. 121(1), pages 111-141.
    8. Andrew Bird & Stephen A Karolyi, 2015. "Governance and taxes: evidence from regression discontinuity," Working Papers 1520, Oxford University Centre for Business Taxation.
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    Cited by:

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    2. Chen, Shuping & Huang, Ying & Li, Ningzhong & Shevlin, Terry, 2019. "How does quasi-indexer ownership affect corporate tax planning?," Journal of Accounting and Economics, Elsevier, vol. 67(2), pages 278-296.

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    More about this item

    Keywords

    Corporate governance; tax avoidance; replication; FTSE Russell; institutional investors; stock market indices;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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    1. Will the Real Specification Please Stand Up? A Comment on Andrew Bird and Stephen Karolyi (EJW 2018) in ReplicationWiki

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