Hello everyone,
for my Master Thesis, I am analyzing the effect of financial crises on earnings management. Herefore, I want to use an OLS regression including the earnings management proxies as the dependent variable (Modified Jones Model etc.) and a crisis indicator (0 in non-crisis and 1 in crisis periods) as the independent variable. In addition, I included other independent variables such as leverage and ROA to control for firm characteristics. My panel data includes 18 countries across 28 crisis periods from 1990 to 2018 (unbalanced). I am only interested in the overall relationship between the crisis indicator and the earnings management proxies. Now I am wondering if it is appropriate to use country fixed effects to control for the effect of different regulatory settings etc. on earnings management. OR if I should use interaction terms or separate regressions for each country. In the end, the only thing that matters for me is if in general earnings management decreases or increases during crises.
Thank you in advance.
Paulo
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