Hi guys, I have a question. If I run my panel data (2007-2013) regression with year and firm fixed effects 2 extra time dummies are dropped because of collinearity (see output below). I already dropped one time dummie myself to avoid dummy variable trap. Could one please have a look at why those years are also dropped from the regression output.
I have also included a correlation matrix for you to check whether something is odd.
If one needs explanation on the variables I am happy to provide upon request.
Thanks in advance,
Best,
Roy Steinvoort
I have also included a correlation matrix for you to check whether something is odd.
If one needs explanation on the variables I am happy to provide upon request.
Thanks in advance,
Best,
Roy Steinvoort
Code:
areg LnCEO_compensation LnMarketcap BtM ROA ChangeInROA LagAnnualizedMonthlyReturn AgeCEO TenureCEO NewCEO
> Boardsize CEOisChair PercOutside PercBusy PercOld PercApptdAfterCEO YEAR*, a(gvkey) cluster(gvkey)
note: YEAR7 omitted because of collinearity
note: YEAR2 omitted because of collinearity
Linear regression, absorbing indicators Number of obs = 6752
F( 18, 1638) = 19.98
Prob > F = 0.0000
R-squared = 0.8421
Adj R-squared = 0.7908
Root MSE = 0.4464
(Std. Err. adjusted for 1639 clusters in gvkey)
--------------------------------------------------------------------------------------------
| Robust
LnCEO_compensation | Coef. Std. Err. t P>|t| [95% Conf. Interval]
---------------------------+----------------------------------------------------------------
LnMarketcap | .0306365 .0084857 3.61 0.000 .0139924 .0472805
BtM | -.0028283 .0017949 -1.58 0.115 -.0063488 .0006921
ROA | .7570996 .2868026 2.64 0.008 .1945611 1.319638
ChangeInROA | .8247792 .2488013 3.32 0.001 .336777 1.312781
LagAnnualizedMonthlyReturn | .0826548 .0167448 4.94 0.000 .0498114 .1154982
AgeCEO | .0030136 .0034373 0.88 0.381 -.0037284 .0097556
TenureCEO | .0439201 .0189114 2.32 0.020 .0068271 .0810132
NewCEO | -.0019386 .0282041 -0.07 0.945 -.0572584 .0533812
Boardsize | -.0073345 .0103377 -0.71 0.478 -.0276111 .0129421
CEOisChair | .0534148 .0323341 1.65 0.099 -.0100058 .1168353
PercOutside | .1392485 .1696608 0.82 0.412 -.1935264 .4720235
PercBusy | .2141589 .0981868 2.18 0.029 .0215739 .4067438
PercOld | .126415 .0903798 1.40 0.162 -.0508572 .3036872
PercApptdAfterCEO | .2963825 .1399405 2.12 0.034 .0219013 .5708637
YEAR2 | 0 (omitted)
YEAR3 | -.0676431 .0278097 -2.43 0.015 -.1221894 -.0130969
YEAR4 | .0007112 .0392487 0.02 0.986 -.0762718 .0776941
YEAR5 | .0247186 .0552832 0.45 0.655 -.0837146 .1331518
YEAR6 | .00256 .0724646 0.04 0.972 -.139573 .144693
YEAR7 | 0 (omitted)
_cons | 7.289132 .275787 26.43 0.000 6.7482 7.830065
---------------------------+----------------------------------------------------------------
gvkey | absorbed (1639 categories)
Code:
pwcorr LnCEO_compensation LnMarketcap BtM ROA ChangeInROA LagAnnualizedMonthlyReturn AgeCEO TenureCEO NewCEO
> Boardsize CEOisChair PercOutside PercBusy PercOld PercApptdAfterCEO YEAR*
| LnCEO_~n LnMark~p BtM ROA Change~A LagAnn~n AgeCEO
-------------+---------------------------------------------------------------
LnCEO_comp~n | 1.0000
LnMarketcap | 0.5894 1.0000
BtM | -0.0519 -0.1029 1.0000
ROA | 0.1028 0.1762 -0.1353 1.0000
ChangeInROA | 0.0702 0.0604 -0.0279 -0.2806 1.0000
LagAnnuali~n | 0.0991 0.0972 -0.0860 0.0886 0.2078 1.0000
AgeCEO | 0.0032 0.0036 0.0048 -0.0349 0.0020 -0.0155 1.0000
TenureCEO | -0.0577 -0.0496 -0.0274 -0.0137 0.0053 0.0085 0.2010
NewCEO | 0.0009 -0.0047 0.0435 -0.0022 -0.0140 -0.0192 0.1019
Boardsize | 0.3145 0.3855 0.1006 -0.0633 0.0206 -0.0356 0.0153
CEOisChair | 0.1349 0.1106 0.0024 0.0240 0.0022 -0.0302 0.2038
PercOutside | 0.2542 0.1712 0.0116 -0.0207 0.0175 -0.0158 -0.0712
PercBusy | 0.3677 0.3415 -0.0280 0.0300 0.0067 0.0023 -0.0711
PercOld | -0.0121 0.0104 -0.0022 -0.0246 0.0105 -0.0085 0.3094
PercApptdA~O | -0.0021 -0.0329 -0.0331 -0.0038 0.0078 0.0295 0.1191
YEAR2 | -0.0466 -0.1203 0.0685 0.0275 -0.0717 -0.0771 -0.0600
YEAR3 | -0.0738 -0.0509 -0.0055 -0.0088 -0.0971 -0.3762 -0.0509
YEAR4 | 0.0077 0.0063 -0.0216 -0.0706 0.1599 0.2665 -0.0189
YEAR5 | 0.0331 -0.0081 -0.0079 0.0201 0.0400 0.1177 0.0566
YEAR6 | 0.0390 0.0719 0.0171 0.0272 -0.0283 -0.1280 0.0761
YEAR7 | 0.0772 0.1073 -0.0364 0.0046 -0.0097 0.0429 0.0829
| Tenure~O NewCEO Boards~e CEOisC~r PercOu~e PercBusy PercOld
-------------+---------------------------------------------------------------
TenureCEO | 1.0000
NewCEO | -0.2020 1.0000
Boardsize | -0.1142 0.0230 1.0000
CEOisChair | 0.1861 0.0323 0.0714 1.0000
PercOutside | -0.1307 0.0219 0.1518 0.1298 1.0000
PercBusy | -0.1667 0.0149 0.1855 0.0816 0.2875 1.0000
PercOld | 0.1502 -0.0114 0.0608 -0.0139 -0.1275 -0.0626 1.0000
PercApptdA~O | 0.8260 -0.2310 -0.1025 0.1942 -0.0427 -0.1172 0.0173
YEAR2 | -0.1061 -0.0101 0.0050 0.0722 -0.0282 0.0371 -0.0757
YEAR3 | -0.0532 -0.0016 -0.0023 0.0656 -0.0356 -0.0002 -0.0500
YEAR4 | 0.0012 0.0243 -0.0007 0.0566 0.0039 -0.0152 -0.0069
YEAR5 | 0.0536 0.0411 -0.0047 -0.0457 0.0252 -0.0158 0.0413
YEAR6 | 0.1050 0.0605 0.0020 -0.0537 0.0344 -0.0324 0.0838
YEAR7 | 0.1568 -0.1132 0.0089 -0.0734 0.0491 -0.0196 0.1002
| PercAp~O YEAR2 YEAR3 YEAR4 YEAR5 YEAR6 YEAR7
-------------+---------------------------------------------------------------
PercApptdA~O | 1.0000
YEAR2 | -0.0879 1.0000
YEAR3 | -0.0516 -0.1663 1.0000
YEAR4 | -0.0190 -0.1670 -0.1674 1.0000
YEAR5 | 0.0456 -0.1669 -0.1673 -0.1680 1.0000
YEAR6 | 0.0872 -0.1673 -0.1677 -0.1684 -0.1683 1.0000
YEAR7 | 0.1377 -0.1681 -0.1685 -0.1691 -0.1691 -0.1695 1.0000