IDEAS home Printed from https://ideas.repec.org/a/wly/coacre/v16y1999i4p711-747.html
   My bibliography  Save this article

The Interpretation of Coefficients in N†Chotomous Qualitative Response Models

Author

Listed:
  • MARC J. LECLERE

Abstract

Researchers in financial accounting often use qualitative response models in choice†based empirical research. Most of this research relies on the familiar techniques of dichotomous probit or logistic regression. Only a limited amount of this research uses n†chotomous qualitative response models such as ordered probit or multinomial logistic regression. A potential explanation for this limited use is that the interpretation of model coefficients in qualitative response models with limited dependent variables (dichotomous or n†chotomous) differs substantially from OLS regression, and econometric texts do not provide a systematic approach to coefficient interpretation. This paper discusses several approaches to interpreting coefficients in n†chotomous qualitative response models. These methods focus on partial derivatives, elasticities of probability, sensitivity analysis, and odds ratios. The methods are applied to the models presented in Thomas (1989) and Mittelstaedt (1989). Additional analyses of the models demonstrate that the methods of interpretation can provide different conclusions or strengthen existing conclusions. The methods provide a better understanding of the directional effects of model coefficients, the relative responsiveness of the probability of choice to changes in the independent variables, and the effects of changes in the independent variables on the probability of choice. These methods should make these models more attractive to researchers interested in choice†based financial accounting research, and allow for a broader range of decision outcomes than that provided by dichotomous qualitative response models.

Suggested Citation

  • Marc J. Leclere, 1999. "The Interpretation of Coefficients in N†Chotomous Qualitative Response Models," Contemporary Accounting Research, John Wiley & Sons, vol. 16(4), pages 711-747, December.
  • Handle: RePEc:wly:coacre:v:16:y:1999:i:4:p:711-747
    DOI: 10.1111/j.1911-3846.1999.tb00602.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1911-3846.1999.tb00602.x
    Download Restriction: no

    File URL: https://libkey.io/10.1111/j.1911-3846.1999.tb00602.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Bamber, LS & Cheon, YS, 1998. "Discretionary management earnings forecast disclosures: Antecedents and outcomes associated with forecast venue and forecast specificity choices," Journal of Accounting Research, Wiley Blackwell, vol. 36(2), pages 167-190.
    2. Brownstone, David & Small, Kenneth A, 1989. "Efficient Estimation of Nested Logit Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(1), pages 67-74, January.
    3. Newberry, KJ, 1998. "Foreign tax credit limitations and capital structure decisions," Journal of Accounting Research, Wiley Blackwell, vol. 36(1), pages 157-166.
    4. Press, Eric G. & Weintrop, Joseph B., 1990. "Accounting-based constraints in public and private debt agreements : Their association with leverage and impact on accounting choice," Journal of Accounting and Economics, Elsevier, vol. 12(1-3), pages 65-95, January.
    5. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    6. Frost, Ca, 1991. "Loss Contingency Reports And Stock-Prices - A Replication And Extension Of Banks And Kinney," Journal of Accounting Research, Wiley Blackwell, vol. 29(1), pages 157-169.
    7. Mandy Ryan, 1997. "Should government fund assisted reproductive techniques? A study using willingness to pay," Applied Economics, Taylor & Francis Journals, vol. 29(7), pages 841-849.
    8. Amemiya, Takeshi, 1981. "Qualitative Response Models: A Survey," Journal of Economic Literature, American Economic Association, vol. 19(4), pages 1483-1536, December.
    9. Ball, Ray & Watts, Ross L. & Zimmerman, Jerold L., 1997. "Five year report on the Journal of Accounting and Economics," Journal of Accounting and Economics, Elsevier, vol. 23(1), pages 3-6, May.
    10. Zmijewski, Mark E. & Hagerman, Robert L., 1981. "An income strategy approach to the positive theory of accounting standard setting/choice," Journal of Accounting and Economics, Elsevier, vol. 3(2), pages 129-149, August.
    11. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    12. Mittelstaedt, H. Fred, 1989. "An empirical analysis of the factors underlying the decision to remove excess assets from overfunded pension plans," Journal of Accounting and Economics, Elsevier, vol. 11(4), pages 399-418, November.
    13. Theil, Henri, 1969. "A Multinomial Extension of the Linear Logit Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(3), pages 251-259, October.
    14. Hausman, Jerry A. & Ruud, Paul A., 1987. "Specifying and testing econometric models for rank-ordered data," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 83-104.
    15. Puro, M, 1984. "Audit Firm Lobbying Before The Financial Accounting Standards Board - An Empirical-Study," Journal of Accounting Research, Wiley Blackwell, vol. 22(2), pages 624-646.
    16. Wallace, Wa, 1981. "The Association Between Municipal Market Measures And Selected Financial-Reporting Practices," Journal of Accounting Research, Wiley Blackwell, vol. 19(2), pages 502-520.
    17. Marais, Ml & Patell, Jm & Wolfson, Ma, 1984. "The Experimental-Design Of Classification Models - An Application Of Recursive Partitioning And Bootstrapping To Commercial Bank Loan Classifications," Journal of Accounting Research, Wiley Blackwell, vol. 22, pages 87-114.
    18. Sutton, Timothy G., 1988. "The proposed introduction of current cost accounting in the U.K. : Determinants of corporate preference," Journal of Accounting and Economics, Elsevier, vol. 10(2), pages 127-149, April.
    19. Becker, William E. & Kennedy, Peter E., 1992. "A Graphical Exposition of the Ordered Probit," Econometric Theory, Cambridge University Press, vol. 8(1), pages 127-131, March.
    20. Thomas, Jacob K., 1989. "Why do firms terminate their overfunded pension plans?," Journal of Accounting and Economics, Elsevier, vol. 11(4), pages 361-398, November.
    21. Beggs, S. & Cardell, S. & Hausman, J., 1981. "Assessing the potential demand for electric cars," Journal of Econometrics, Elsevier, vol. 17(1), pages 1-19, September.
    22. Lilien, Steven & Pastena, Victor, 1982. "Determinants of intramethod choice in the oil and gas industry," Journal of Accounting and Economics, Elsevier, vol. 4(3), pages 145-170, December.
    23. Skinner, Douglas J., 1993. "The investment opportunity set and accounting procedure choice : Preliminary evidence," Journal of Accounting and Economics, Elsevier, vol. 16(4), pages 407-445, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hernandez Tinoco, Mario & Holmes, Phil & Wilson, Nick, 2018. "Polytomous response financial distress models: The role of accounting, market and macroeconomic variables," International Review of Financial Analysis, Elsevier, vol. 59(C), pages 276-289.
    2. Jones, Stewart & Hensher, David A., 2007. "Modelling corporate failure: A multinomial nested logit analysis for unordered outcomes," The British Accounting Review, Elsevier, vol. 39(1), pages 89-107.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. William H. Greene & David A. Hensher, 2008. "Modeling Ordered Choices: A Primer and Recent Developments," Working Papers 08-26, New York University, Leonard N. Stern School of Business, Department of Economics.
    2. Thomas W. Scott, 1991. "Pension disclosures under SFAS No. 87: Theory and evidence," Contemporary Accounting Research, John Wiley & Sons, vol. 8(1), pages 62-81, September.
    3. Golan, Amos & Judge, George & Perloff, Jeffrey, 1997. "Estimation and inference with censored and ordered multinomial response data," Journal of Econometrics, Elsevier, vol. 79(1), pages 23-51, July.
    4. Adrian C. Darnell, 1994. "A Dictionary Of Econometrics," Books, Edward Elgar Publishing, number 118.
    5. Grzybek, Olga, 2023. "Are accounting choices for intangible assets informative or opportunistic? Evidence from Poland," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 51(C).
    6. Fields, Thomas D. & Lys, Thomas Z. & Vincent, Linda, 2001. "Empirical research on accounting choice," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 255-307, September.
    7. Susana Callao & José Ignacio Jarne, 2010. "Have IFRS Affected Earnings Management in the European Union?," Accounting in Europe, Taylor & Francis Journals, vol. 7(2), pages 159-189, December.
    8. Messod D. Beneish & Eric Press, 1995. "Interrelation Among Events of Default," Contemporary Accounting Research, John Wiley & Sons, vol. 12(1), pages 57-84, September.
    9. Paul Klumpes & Mark Whittington & Yong Li, 2009. "Determinants of the Pension Curtailment Decisions of UK Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(7-8), pages 899-924.
    10. Begley, Joy & Feltham, Gerald A., 1999. "An empirical examination of the relation between debt contracts and management incentives," Journal of Accounting and Economics, Elsevier, vol. 27(2), pages 229-259, April.
    11. Shackelford, Douglas A. & Shevlin, Terry, 2001. "Empirical tax research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 321-387, September.
    12. Han, Bong H. & Manry, David, 2004. "The value-relevance of R&D and advertising expenditures: Evidence from Korea," The International Journal of Accounting, Elsevier, vol. 39(2), pages 155-173.
    13. Paul Klumpes & Mark Whittington & Yong Li, 2009. "Determinants of the Pension Curtailment Decisions of UK Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(7‐8), pages 899-924, September.
    14. Giuseppe Croce & Emanuela Ghignoni, 2011. "Overeducation and spatial flexibility in Italian local labour markets," Working Papers in Public Economics 145, Department of Economics and Law, Sapienza University of Roma.
    15. Hany Eldemerdash & Hugh Metcalf & Sara Maioli, 2014. "Twin deficits: new evidence from a developing (oil vs. non-oil) countries’ perspective," Empirical Economics, Springer, vol. 47(3), pages 825-851, November.
    16. Maria Iacovou, 2002. "Class Size in the Early Years: Is Smaller Really Better?," Education Economics, Taylor & Francis Journals, vol. 10(3), pages 261-290.
    17. Cawley, John & Markowitz, Sara & Tauras, John, 2004. "Lighting up and slimming down: the effects of body weight and cigarette prices on adolescent smoking initiation," Journal of Health Economics, Elsevier, vol. 23(2), pages 293-311, March.
    18. Kumar, Sushil & Kant, Shashi, 2007. "Exploded logit modeling of stakeholders' preferences for multiple forest values," Forest Policy and Economics, Elsevier, vol. 9(5), pages 516-526, January.
    19. Oded Palmon & Ben J. Sopranzetti, 2017. "On the relationship between the number of a broker’s real estate listings and transaction outcomes," Review of Quantitative Finance and Accounting, Springer, vol. 49(1), pages 65-89, July.
    20. O'Brien, Raymond & Patacchini, Eleonora, 2003. "Testing the exogeneity assumption in panel data models with "non classical" disturbances," Discussion Paper Series In Economics And Econometrics 0302, Economics Division, School of Social Sciences, University of Southampton.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:coacre:v:16:y:1999:i:4:p:711-747. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1911-3846 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.