Scholarly Comments on Academic Economics

A Response to “Critique of an Article on Machine Learning in the Detection of Accounting Fraud”

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Abstract

Stephen Walker (2021) raises two empirical issues about our article in the Journal of Accounting Research (Bao, Ke, Li, Yu, and Zhang 2020). The first one is about our treatment of missing values for the raw financial statement variables. The second one is about our treatment of serial fraud. Walker (2021) suggests an alternative approach to dealing with serial fraud and claims that inferences change significantly if his approach is adopted. We reexamine the impact of the two issues on our inferences and find no evidence that these two issues alter our paper’s inferences.

This article is a response to Critique of an Article on Machine Learning in the Detection of Accounting Fraud by Stephen Walker (EJW, March 2021).