Hi everyone,
I am investigating the effect of financial adviser reputation on various dependent variables (CAR, Deal premium, Time to completion) in the context of M&A. By classifying bidder and target advisers into top-tier and non-top-tier categories, I create various dummy variables (Bidder and Target top-tier) and interaction terms of adviser reputation. My model is specified in the following way (see attachment):
reg Target_CAR Bidder_Adviser_Top_Tier T_Adviser_Top_Tier (Bidder_Adviser_Top & Target_Adviser_Top) (Bidder_Adviser_Top & Target_Adviser_Non_Top) (Bidder_Adviser_Non_Top & Target_Adviser_Top)
However, Stata seems to omit two interaction terms because of collinearity. Does anyone have an idea why this happens? As far as I know this should be possible because these terms are not directly linked and I already excluded the interaction term of non-top-tier bidder and target advisers. Is my model specified incorrectly specified, or what could have gone wrong?
Thank you in advance!
Martin
I am investigating the effect of financial adviser reputation on various dependent variables (CAR, Deal premium, Time to completion) in the context of M&A. By classifying bidder and target advisers into top-tier and non-top-tier categories, I create various dummy variables (Bidder and Target top-tier) and interaction terms of adviser reputation. My model is specified in the following way (see attachment):
reg Target_CAR Bidder_Adviser_Top_Tier T_Adviser_Top_Tier (Bidder_Adviser_Top & Target_Adviser_Top) (Bidder_Adviser_Top & Target_Adviser_Non_Top) (Bidder_Adviser_Non_Top & Target_Adviser_Top)
However, Stata seems to omit two interaction terms because of collinearity. Does anyone have an idea why this happens? As far as I know this should be possible because these terms are not directly linked and I already excluded the interaction term of non-top-tier bidder and target advisers. Is my model specified incorrectly specified, or what could have gone wrong?
Thank you in advance!
Martin
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