Construct validity in accruals quality research

Alexander Nezlobin, Richard G. Sloan and Jenny Zha Giedt

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: A large body of empirical research in accounting investigates the causes and consequences of accruals quality, reaching numerous influential conclusions. Yet little work has been done to systematically evaluate the validity of the underlying measures of accruals quality. We evaluate these measures using three criteria: (1) Is the measure unaffected by the underlying economic determinants of accruals? (2) Does the measure consistently reflect errors in accruals? (3) Does the measure facilitate tests with sufficient power to detect plausible variation in accrual errors? Using a combination of theoretical modeling and numerical simulations, we show that all measures fail at least one of these criteria. Our evaluation provides new interpretations of existing research and guides the choice of measures and the interpretation of results in future research. Data Availability: Data are available from the public sources identified in the paper.

Keywords: accruals quality; construct validity; power; specification (search for similar items in EconPapers)
JEL-codes: C12 M41 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2022-09-01
New Economics Papers: this item is included in nep-acc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Accounting Review, 1, September, 2022, 97(5), pp. 377 – 398. ISSN: 0001-4826

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:112165

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