Systematic Bias in the Progress of Finance Research

The degree to which scientific work is referenced is expected to relate only to its scientific merits and rigor. In this paper, we analyze whether citing practices in finance follow this directive, or whether they are systematically biased due to agency considerations. The discontinuation of the Journal of Business (JB) in 2006 for extraneous reasons serves as the exogenous shock for analyzing agency-related citing behavior. Using difference-in-differences analysis, we find that articles published in JB before 2006 experienced a decrease of approximately 16% in citations after 2006. If citing practices were based only on scientific merits, no reduction in citations should be experienced for these already published articles, as the discontinuation of JB has nothing to do with their contribution to science. Overall, the results imply that the referencing of articles in finance is systematically affected by agency problems, which hinders the scientific progress of the field.