If one has a panel data set is it appropriate to estimate Modified Jones model cross sectionally?
secondly, if you have a sample subdivided into different categories (e.g, distressed and non-distressed or industrial sector grouping, will the regression for the purpose of determining the coefficients for discretionary accruals computation be performed on the sub-group basis or is done on the basis of the entire sample?
you can estimate modified Jones model with panel data.
if you have groups in the sample, you can introduce dummy variable into the regression model.
any furthe discussion in this regard is most welcome..
Thank you Potharla. I was wondering that there will be implications on which option one use. That is either cross sectional or panal data set.
On the introduction of dummy variable, am quite aware of that. My problem is that in the case where discretionary is a dependent variable and the formula is picked as given by Jones or modified Jones, for instance, how do you bring dummy variable in. However, when one is considering the independent variables, then the dummy variable can be used. That is my little confusion.
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