OLS- Putting Zero in the Values of R&D
.regress FirmValue Performance Leverage Firmsize LnRD Profit, vce(cluster firm_id)
Linear regression Number of obs = 33,314
F(5, 5758) = 160.51
Prob > F = 0.0000
R-squared = 0.3910
Root MSE = 19.132
(Std. Err. adjusted for 5,759 clusters in firm_id)
------------------------------------------------------------------------------
| Robust
FirmValue | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
Performance .000011 8.67e-06 1.27 0.203 -5.95e-06 .000028
Leverage 4.016042 1.662355 2.42 0.016 .7572011 7.274883
Firmsize -.9102124 .1431892 -6.36 0.000 -1.190917 -.6295077
LnRD | .0198405 .0589907 0.34 0.737 -.0958035 .1354845
Profit | 6.622854 .269505 24.57 0.000 6.094523 7.151186
_cons | 7.759731 1.145424 6.77 0.000 5.51427 10.00519
------------------------------------------------------------------------------
The regression equation
Firm Value = 7.759731+0.000011 Performance + 4.016042 Leverage -.9102124FirmSize
+.0198405LnRD + 6.622854Profitability
We can see from the results of the regression analysis that the signs of the coefficients are
more appropriate, similar to the leverage coefficient. The coefficient of leverage was lower prior
to setting the values of R&D to zero, against the anticipated notion.Now it is 4.016042.The
coefficient of firmsize is very negative after putting the value of zero. However, all of the values
are still significant. The 39.10% variability of the dependent variable can be explained by the
predicted independent variable.
Fixed effect - Putting Zero in the Values of R&D
. xtreg FirmValue Performance Leverage Firmsize LnRD Profit, fe vce(cluster firm_id)
Fixed-effects (within) regression Number of obs = 33,314
Group variable: firm_id Number of groups = 5,759
R-sq: Obs per group:
within = 0.2992 min = 1
between = 0.1335 avg = 5.8
overall = 0.3084 max = 10
F(5,5758) = 176.53
corr(u_i, Xb) = -0.3942 Prob > F = 0.0000
(Std. Err. adjusted for 5,759 clusters in firm_id)
------------------------------------------------------------------------------
| Robust
FirmValue | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
Performance | -.0000171 .0000127 -1.35 0.178 -.0000421 7.82e-06
Leverage 5.915579 1.516931 3.90 0.000 2.941823 8.889334
Firmsize | -5.018703 3.079737 -1.63 0.103 -11.05614 1.018739
LnRD | .089574 .3067307 0.29 0.770 -.5117335 .6908815
Profit | 7.264633 .5023038 14.46 0.000 6.279929 8.249337
_cons | 36.43343 21.56596 1.69 0.091 -5.843962 78.71082
-------------+----------------------------------------------------------------
sigma_u | 23.853493
sigma_e | 14.902906
rho | .71925091 (fraction of variance due to u_i)
Regression Equation
Firm value = 36.43343 - .0000171 Performance + 5.915579 Leverage – 5.018703 Firm size
+ .08574 LnRD + 7.264633 Profit.
We can see from the results of the regression analysis that the signs of the coefficients are
more appropriate, similar to the leverage coefficient. The coefficient of leverage was lower prior
to setting the values of R&D to zero, against the anticipated notion.Now it is 5.915579. The
coefficient of firmsize is more negative after putting the value of zero. Profitability has also
greater impact on firm value after putting zero value. However, all of the values are still
significant. The 30.84% variability of the dependent variable can be explained by the predicted
independent variable.
Firm and year fixed Putting Zero in the Values of R&D
xtreg FirmValue Performance Leverage Firmsize LnRD Profit i.year, fe vce(cluster firm_id)
Fixed-effects (within) regression Number of obs = 33,314
Group variable: firm_id Number of groups = 5,759
R-sq: Obs per group:
within = 0.3013 min = 1
between = 0.1189 avg = 5.8
overall = 0.2835 max = 10
F(18,5758) = 560.47
corr(u_i, Xb) = -0.4651 Prob > F = 0.0000
(Std. Err. adjusted for 5,759 clusters in firm_id)
-----------------------------------------------------------------------------
| Robust
FirmValue | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
Performance | -5.70e-06 8.81e-06 -0.65 0.518 -.000023 .0000116
Leverage | 5.286795 2.006095 2.64 0.008 1.354094 9.219497
Firmsize | -5.844383 3.741294 -1.56 0.118 -13.17873 1.489959
LnRD | .0322142 .3561881 0.09 0.928 -.6660485 .7304769
Profit | 7.283295 .5116064 14.24 0.000 6.280354 8.286236
|
year |
2011 | -.7397202 .5361566 -1.38 0.168 -1.790789 .3113484
2012 | -1.34001 1.365889 -0.98 0.327 -4.017667 1.337647
2013 | -1.122857 1.629317 -0.69 0.491 -4.316932 2.071218
2014 | -.1194236 .4671321 -0.26 0.798 -1.035178 .7963309
2015 | -.1932725 .6994543 -0.28 0.782 -1.564466 1.177921
2016 | -.0821748 .5815498 -0.14 0.888 -1.222231 1.057881
2017 | .4833462 .3530695 1.37 0.171 -.2088027 1.175495
2018 | .5915075 .3943187 1.50 0.134 -.1815053 1.36452
2019 | .8980359 .5735833 1.57 0.117 -.226403 2.022475
2020 | 1.768756 1.034751 1.71 0.087 -.2597452 3.797257
2021 | 2.180077 1.278056 1.71 0.088 -.3253942 4.685547
2022 | 1.694133 .9282228 1.83 0.068 -.1255324 3.513799
2023 | 1.729485 .7247547 2.39 0.017 .3086933 3.150277
|
_cons | 42.24164 26.59853 1.59 0.112 -9.901477 94.38476
-------------+----------------------------------------------------------------
sigma_u | 24.610813
sigma_e | 14.884474
rho | .73218456 (fraction of variance due to u_i)
Regression Equation
Firm Value = | 42.24164 - | -5.70e-06 Performance +5.286795Leverage - -5.844383
FirmSize+.032214RD+7.283295Profitability-.7397202 2011-.32132172012-
1.1228572013-.11942362014-.19327252015-.08217482016+.4833462017-.59150752018+2019.8980359+1.7
687562020+2.1800772021+| 1.6941332022+1.7294852023
The combined model allows to eliminate bias from unobservables that change over time from
2011 to 2023 but are constant over entities and it controls for factors that differ across firms but
are constant over time and it is significant for most of the years but not in year 2017,2018 and
2019. However, the coefficients of performance (-5.70e-06) and firm size (- 5.844383) are
showing an inverse relationship with firm value. After putting zero in r&d, the coefficient of
leverage has been positive. The 28.35% variability of the dependent variable can be explained
by the predicted independent variable after putting zero.
Industry and year fixed Putting Zero in the Values of R&D
Fixed-effects (within) regression Number of obs = 32,682
Group variable: firm_id Number of groups = 5,725
R-sq: Obs per group:
within = 0.0273 min = 1
between = 0.0053 avg = 5.7
overall = 0.0041 max = 10
F(24,5724) = .
corr(u_i, Xb) = -0.6301 Prob > F = .
(Std. Err. adjusted for 5,725 clusters in firm_id)
------------------------------------------------------------------------------
| Robust
FirmValue Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
Performance | -7.37e-06 7.84e-06 -0.94 0.347 -.0000227 7.99e-06
Leverage | 3.292113 3.581008 0.92 0.358 -3.728019 10.31224
Firmsize | -5.532365 5.060151 -1.09 0.274 -15.45218 4.387446
LnRD | -.1219228 .1322588 -0.92 0.357 -.3812002 .1373546
Profit | 4.792335 6.442023 0.74 0.457 -7.836467 17.42114
|
year |
2011 | -.5888945 .5628672 -1.05 0.295 -1.692327 .5145383
2012 | -1.724724 1.594907 -1.08 0.280 -4.851345 1.401897
2013 | -1.625971 1.791999 -0.91 0.364 -5.138967 1.887026
2014 | -.4138132 .5349428 -0.77 0.439 -1.462504 .6348772
2015 | -.6294835 .5519679 -1.14 0.254 -1.711549 .4525825
2016 | -.5509232 .4895783 -1.13 0.261 -1.510682 .4088357
2017 | .1057909 .1689152 0.63 0.531 -.2253469 .4369287
2018 | .1551513 .3634924 0.43 0.670 -.5574313 .867734
2019 | .564419 .597065 0.95 0.345 -.6060544 1.734892
2020 | 1.410674 1.15139 1.23 0.221 -.8464855 3.667833
2021 | 1.864307 1.399372 1.33 0.183 -.878992 4.607606
2022 | 1.298626 1.042876 1.25 0.213 -.745806 3.343058
2023 | 1.265113 .9586879 1.32 0.187 -.6142786 3.144504
|
sic_n |
200 | 0 (omitted)
700 | 0 (omitted)
800 | 0 (omitted)
1000 | 0 (omitted)
1040 | 0 (omitted)
1044 | 0 (omitted)
1090 | 0 (omitted)
1220 | 0 (omitted)
1221 | 0 (omitted)
1311 | 3.604971 4.891038 0.74 0.461 -5.983314 13.19326
1381 | -1.673295 1.707055 -0.98 0.327 -5.01977 1.673179
1382 | 2.52546 2.267623 1.11 0.265 -1.919939 6.970859
1389 | .183226 1.289125 0.14 0.887 -2.343947 2.710399
1400 | 0 (omitted)
1520 | 0 (omitted)
1531 | 0 (omitted)
1540 | 0 (omitted)
1600 | 6.106848 5.127557 1.19 0.234 -3.945105 16.1588
1623 | 0 (omitted)
1700 | -5.950532 5.722048 -1.04 0.298 -17.16791 5.266848
1731 | 0 (omitted)
2000 | 0 (omitted)
2011 | 0 (omitted)
2013 | 0 (omitted)
2015 | 0 (omitted)
2020 | 0 (omitted)
2024 | 0 (omitted)
2030 | 0 (omitted)
2033 | 0 (omitted)
2040 | 0 (omitted)
2050 | 0 (omitted)
2052 | 0 (omitted)
2060 | 0 (omitted)
2070 | 0 (omitted)
2080 | 0 (omitted)
2082 | 0 (omitted)
2084 | 0 (omitted)
2085 | 0 (omitted)
2086 | 0 (omitted)
2090 | 5.786193 5.359202 1.08 0.280 -4.719872 16.29226
2100 | 0 (omitted)
2111 | 0 (omitted)
2200 | 0 (omitted)
2211 | 0 (omitted)
2221 | 0 (omitted)
2273 | 0 (omitted)
2300 | 0 (omitted)
2320 | 0 (omitted)
2330 | 0 (omitted)
2340 | 0 (omitted)
2400 | 0 (omitted)
2421 | 0 (omitted)
2430 | 0 (omitted)
2451 | 0 (omitted)
2452 | 0 (omitted)
2510 | 0 (omitted)
2511 | 0 (omitted)
2520 | 0 (omitted)
2522 | 0 (omitted)
2531 | 0 (omitted)
2590 | 0 (omitted)
2611 | 0 (omitted)
2621 | 0 (omitted)
2631 | -4.607764 4.214146 -1.09 0.274 -12.86909 3.653558
2650 | 0 (omitted)
2670 | 0 (omitted)
2673 | 0 (omitted)
2711 | 0 (omitted)
2721 | 0 (omitted)
2731 | 0 (omitted)
2732 | 0 (omitted)
2741 | 0 (omitted)
2750 | 0 (omitted)
2761 | 0 (omitted)
2771 | 0 (omitted)
2780 | 0 (omitted)
2790 | 0 (omitted)
2800 | 0 (omitted)
2810 | 0 (omitted)
2820 | 0 (omitted)
2821 | 0 (omitted)
2833 | 0 (omitted)
2834 | -2.173259 3.554793 -0.61 0.541 -9.141998 4.79548
2835 | -8.411944 11.02676 -0.76 0.446 -30.02857 13.20468
2836 | -2.042488 3.466752 -0.59 0.556 -8.838634 4.753659
2840 | 0 (omitted)
2842 | 0 (omitted)
2844 | 0 (omitted)
2851 | 0 (omitted)
2860 | 0 (omitted)
2870 | 0 (omitted)
2890 | 0 (omitted)
2891 | 0 (omitted)
2911 | 0 (omitted)
2950 | 0 (omitted)
2990 | 0 (omitted)
3011 | 0 (omitted)
3021 | 0 (omitted)
3050 | 0 (omitted)
3060 | 0 (omitted)
3080 | 0 (omitted)
3081 | 0 (omitted)
3086 | 0 (omitted)
3089 | 0 (omitted)
3100 | 0 (omitted)
3140 | 0 (omitted)
3220 | 0 (omitted)
3221 | 0 (omitted)
3241 | 0 (omitted)
3270 | 0 (omitted)
3272 | 0 (omitted)
3281 | 0 (omitted)
3290 | 0 (omitted)
3310 | 0 (omitted)
3312 | 0 (omitted)
3317 | 0 (omitted)
3330 | 0 (omitted)
3334 | 0 (omitted)
3341 | 0 (omitted)
3350 | 0 (omitted)
3357 | 0 (omitted)
3390 | 0 (omitted)
3411 | 0 (omitted)
3420 | 0 (omitted)
3430 | 0 (omitted)
3440 | 0 (omitted)
3442 | 0 (omitted)
3443 | 0 (omitted)
3448 | 0 (omitted)
3452 | 0 (omitted)
3460 | 0 (omitted)
3470 | 0 (omitted)
3480 | 0 (omitted)
3490 | 0 (omitted)
3510 | 0 (omitted)
3523 | 0 (omitted)
3524 | 0 (omitted)
3530 | 0 (omitted)
3531 | 0 (omitted)
3532 | 0 (omitted)
3533 | 0 (omitted)
3537 | 0 (omitted)
3540 | 0 (omitted)
3541 | 0 (omitted)
3550 | 0 (omitted)
3555 | 0 (omitted)
3559 | 0 (omitted)
3560 | 0 (omitted)
3561 | 0 (omitted)
3562 | 0 (omitted)
3564 | 0 (omitted)
3567 | 0 (omitted)
3569 | 0 (omitted)
3570 | 0 (omitted)
3571 | 0 (omitted)
3572 | -20.46744 18.09555 -1.13 0.258 -55.94157 15.0067
3576 | 0 (omitted)
3577 | -3.136887 7.001961 -0.45 0.654 -16.86338 10.58961
3578 | 0 (omitted)
3579 | 0 (omitted)
3580 | 0 (omitted)
3585 | 5.505526 5.566002 0.99 0.323 -5.405944 16.417
3590 | 0 (omitted)
3600 | 0 (omitted)
3612 | 0 (omitted)
3613 | 0 (omitted)
3620 | 0 (omitted)
3621 | 0 (omitted)
3630 | 0 (omitted)
3634 | 0 (omitted)
3640 | 0 (omitted)
3651 | 0 (omitted)
3661 | 0 (omitted)
3663 | 0 (omitted)
3669 | 0 (omitted)
3670 | 0 (omitted)
3672 | 0 (omitted)
3674 | 0 (omitted)
3677 | 0 (omitted)
3678 | 0 (omitted)
3679 | 0 (omitted)
3690 | 0 (omitted)
3711 | 0 (omitted)
3713 | 0 (omitted)
3714 | 0 (omitted)
3715 | 0 (omitted)
3720 | 5.937413 5.97477 0.99 0.320 -5.775396 17.65022
3721 | 8.219717 6.775381 1.21 0.225 -5.062594 21.50203
3724 | 0 (omitted)
3728 | 0 (omitted)
3730 | 0 (omitted)
3743 | 0 (omitted)
3751 | 0 (omitted)
3760 | 0 (omitted)
3790 | 0 (omitted)
3812 | 0 (omitted)
3821 | 0 (omitted)
3823 | 0 (omitted)
3824 | 0 (omitted)
3825 | 0 (omitted)
3826 | 0 (omitted)
3827 | 0 (omitted)
3829 | 0 (omitted)
3841 | 1.796268 1.401933 1.28 0.200 -.952052 4.544588
3842 | 9.225354 2.942501 3.14 0.002 3.456938 14.99377
3843 | 0 (omitted)
3844 | 0 (omitted)
3845 | 4.758348 7.08554 0.67 0.502 -9.131992 18.64869
3851 | 0 (omitted)
3861 | 0 (omitted)
3873 | 0 (omitted)
3910 | 4.475007 4.529342 0.99 0.323 -4.404218 13.35423
3911 | 0 (omitted)
3931 | 0 (omitted)
3942 | 0 (omitted)
3944 | 0 (omitted)
3949 | 0 (omitted)
3950 | 0 (omitted)
3990 | 0 (omitted)
4011 | 0 (omitted)
4100 | 0 (omitted)
4210 | -4.973868 5.216812 -0.95 0.340 -15.20079 5.253058
4213 | 0 (omitted)
4400 | 0 (omitted)
4412 | 0 (omitted)
4512 | 0 (omitted)
4513 | 0 (omitted)
4522 | 0 (omitted)
4581 | 0 (omitted)
4610 | -1.020182 1.389108 -0.73 0.463 -3.74336 1.702995
4700 | 3.120594 1.436191 2.17 0.030 .3051163 5.936071
4731 | 0 (omitted)
4812 | 0 (omitted)
4813 | 0 (omitted)
4832 | 0 (omitted)
4833 | 0 (omitted)
4841 | 0 (omitted)
4888 | 0 (omitted)
4899 | -1.164396 2.953905 -0.39 0.693 -6.955168 4.626376
4911 | 0 (omitted)
4922 | 6.937054 6.184166 1.12 0.262 -5.186253 19.06036
4923 | 0 (omitted)
4924 | 0 (omitted)
4931 | 0 (omitted)
4932 | 0 (omitted)
4941 | 0 (omitted)
4950 | 0 (omitted)
4953 | 0 (omitted)
4955 | 0 (omitted)
4991 | 0 (omitted)
5000 | 0 (omitted)
5010 | 0 (omitted)
5013 | 0 (omitted)
5030 | 0 (omitted)
5031 | 0 (omitted)
5040 | 0 (omitted)
5045 | 0 (omitted)
5047 | 9.437786 8.345243 1.13 0.258 -6.922048 25.79762
5051 | 0 (omitted)
5063 | 0 (omitted)
5065 | 0 (omitted)
5070 | 0 (omitted)
5072 | 0 (omitted)
5080 | 0 (omitted)
5084 | 0 (omitted)
5090 | 0 (omitted)
5093 | 0 (omitted)
5110 | 0 (omitted)
5122 | 0 (omitted)
5130 | 0 (omitted)
5140 | 14.55241 13.74381 1.06 0.290 -12.39066 41.49548
5141 | 0 (omitted)
5150 | 0 (omitted)
5160 | 0 (omitted)
5171 | 1.977961 1.132162 1.75 0.081 -.2415049 4.197428
5172 | 0 (omitted)
5180 | 0 (omitted)
5190 | 0 (omitted)
5200 | 0 (omitted)
5211 | 0 (omitted)
5311 | 0 (omitted)
5331 | 0 (omitted)
5399 | 0 (omitted)
5400 | 0 (omitted)
5411 | 0 (omitted)
5412 | 0 (omitted)
5500 | 0 (omitted)
5531 | 0 (omitted)
5600 | 0 (omitted)
5621 | 0 (omitted)
5651 | 0 (omitted)
5661 | 0 (omitted)
5700 | 0 (omitted)
5712 | 0 (omitted)
5731 | 0 (omitted)
5734 | 0 (omitted)
5735 | 0 (omitted)
5810 | 0 (omitted)
5812 | -10.80373 14.50335 -0.74 0.456 -39.23579 17.62834
5900 | 0 (omitted)
5912 | 0 (omitted)
5940 | 0 (omitted)
5944 | 0 (omitted)
5945 | 0 (omitted)
5960 | 0 (omitted)
5961 | 0 (omitted)
5990 | 0 (omitted)
6020 | 4.411939 3.749675 1.18 0.239 -2.938843 11.76272
6035 | 5.303982 4.560889 1.16 0.245 -3.637086 14.24505
6036 | 0 (omitted)
6099 | 1.215773 1.437966 0.85 0.398 -1.603185 4.034731
6111 | 10.86887 9.400011 1.16 0.248 -7.558711 29.29645
6141 | 0 (omitted)
6153 | 0 (omitted)
6159 | 8.379914 7.298818 1.15 0.251 -5.928533 22.68836
6162 | 0 (omitted)
6163 | 0 (omitted)
6172 | 0 (omitted)
6199 | 0 (omitted)
6200 | 0 (omitted)
6211 | -12.65084 19.43533 -0.65 0.515 -50.75146 25.44977
6282 | -.9396151 .8431343 -1.11 0.265 -2.592477 .7132473
6311 | 0 (omitted)
6321 | 0 (omitted)
6324 | 0 (omitted)
6331 | 0 (omitted)
6351 | 0 (omitted)
6361 | 0 (omitted)
6411 | 0 (omitted)
6500 | 0 (omitted)
6510 | -.8630512 .9950634 -0.87 0.386 -2.813752 1.08765
6512 | 0 (omitted)
6519 | 0 (omitted)
6531 | 0 (omitted)
6532 | 0 (omitted)
6552 | 0 (omitted)
6726 | 0 (omitted)
6792 | 0 (omitted)
6794 | 3.580492 2.236109 1.60 0.109 -.8031282 7.964113
6795 | 0 (omitted)
6797 | 0 (omitted)
6798 | 0 (omitted)
6799 | 0 (omitted)
7000 | 0 (omitted)
7011 | 0 (omitted)
7200 | 0 (omitted)
7310 | 0 (omitted)
7311 | 0 (omitted)
7320 | 0 (omitted)
7323 | 0 (omitted)
7331 | 0 (omitted)
7340 | 0 (omitted)
7350 | 0 (omitted)
7359 | 0 (omitted)
7361 | 0 (omitted)
7363 | 0 (omitted)
7370 | -2.032849 2.090087 -0.97 0.331 -6.13021 2.064512
7371 | 0 (omitted)
7372 | 0 (omitted)
7373 | .5429746 1.517849 0.36 0.721 -2.432585 3.518534
7374 | 5.365547 4.244791 1.26 0.206 -2.955849 13.68694
7380 | 0 (omitted)
7381 | 0 (omitted)
7389 | 0 (omitted)
7500 | 0 (omitted)
7510 | 0 (omitted)
7812 | 0 (omitted)
7822 | 0 (omitted)
7830 | 0 (omitted)
7841 | 0 (omitted)
7900 | -.5804116 1.352926 -0.43 0.668 -3.232658 2.071835
7948 | 0 (omitted)
7990 | 0 (omitted)
7996 | 0 (omitted)
7997 | 0 (omitted)
8000 | 0 (omitted)
8011 | 0 (omitted)
8050 | 0 (omitted)
8051 | 0 (omitted)
8060 | 0 (omitted)
8062 | 14.58551 20.51706 0.71 0.477 -25.6357 54.80672
8071 | 0 (omitted)
8082 | -14.26472 11.71605 -1.22 0.223 -37.23261 8.703176
8090 | -8.036302 6.956722 -1.16 0.248 -21.67411 5.601507
8093 | 0 (omitted)
8111 | 0 (omitted)
8200 | 0 (omitted)
8300 | 0 (omitted)
8351 | 0 (omitted)
8700 | 0 (omitted)
8711 | 0 (omitted)
8721 | 0 (omitted)
8731 | 0 (omitted)
8734 | 0 (omitted)
8741 | 0 (omitted)
8742 | 0 (omitted)
8744 | 0 (omitted)
9995 | 0 (omitted)
9997 | 0 (omitted)
|
_cons | 40.38389 35.69336 1.13 0.258 -29.58859 110.3564
-------------+----------------------------------------------------------------
sigma_u | 24.575522
sigma_e | 14.495018
rho | .74190468 (fraction of variance due to u_i)
The regression equation Firm Value = 40.38389 + -7.37e-06Performance +3.292113Leverage -
5.532365 FirmSize +-.1219228 RD +4.792335Profitability
The combined model allows to eliminate bias from unobservables that change over time from
2011 to 2023 but are constant over industries and it controls for factors that differ across firms
but are constant over time and it is significant for all of the independent variables except market
share along with the industry code of 2835,3842, 5140, 8062, and for the years 2086, 2400,
4812, 6200 along with the year 2012,2013,2020 and 2023. The .041% variability of the
dependent variable can be explained by the predicted independent variable.
