Dear All,
I have a problem with the interpretation of interaction terms in my regression. My regression formula is as follows:
PRICEit = α0 + α1IFRSit + α2SMARKETin + α3BVPSit + α4SMARKETint*BVPSit + α5IFRSit*BVPSit + α6SMARKETint*IFRSit*BVPSit + α7EPSit + α8SMARKETint*EPSit + α9IFRSit*EPSit + α10SMARKETint*IFRSit*EPSit + α11SIZEit + α12LEVit + αa∑YEARi + εit
IFRS is a dummy variable which is 1 for the years 2005 and after, 0 otherwise
SMARKET is a proxy variable for the strength of capital market in the country. It takes 1 for the country-year observations if the country’s score is greater than or equal to the sample median for that year.
My aim is to see the incremental effect of SMARKET for the value relevance of BVPS and EPS in the before and after IFRS periods. To see this I put interaction terms as SMARKETint*BVPSit and SMARKETint*IFRSit*BVPSit for BVPS and SMARKETint*EPSit and SMARKETint*IFRSit*EPSit for EPS.
I put the regression results in the attached file. First I run the regression model for the whole period, then to check if the results are logical or not, I run the regression model seperately for the afterIFRS and beforeIFRS periods. In the whole period results, sign of the SMARKET_BVPS is positive which means SMARKET have a positive incremental effect on BVPS in beforeIFRS period. However, in the beforeIFRS regression results, the sign of SMARKET_BVPS is negative which contradicts with the whole period results. There are some other inconsistencies like this but I think if I can understand the reason of one, others will also be clear for me.
I would aprreciate if you tell me what is wrong with my model or my interpretations regarding regression results.
Thanks in advance
I have a problem with the interpretation of interaction terms in my regression. My regression formula is as follows:
PRICEit = α0 + α1IFRSit + α2SMARKETin + α3BVPSit + α4SMARKETint*BVPSit + α5IFRSit*BVPSit + α6SMARKETint*IFRSit*BVPSit + α7EPSit + α8SMARKETint*EPSit + α9IFRSit*EPSit + α10SMARKETint*IFRSit*EPSit + α11SIZEit + α12LEVit + αa∑YEARi + εit
IFRS is a dummy variable which is 1 for the years 2005 and after, 0 otherwise
SMARKET is a proxy variable for the strength of capital market in the country. It takes 1 for the country-year observations if the country’s score is greater than or equal to the sample median for that year.
My aim is to see the incremental effect of SMARKET for the value relevance of BVPS and EPS in the before and after IFRS periods. To see this I put interaction terms as SMARKETint*BVPSit and SMARKETint*IFRSit*BVPSit for BVPS and SMARKETint*EPSit and SMARKETint*IFRSit*EPSit for EPS.
I put the regression results in the attached file. First I run the regression model for the whole period, then to check if the results are logical or not, I run the regression model seperately for the afterIFRS and beforeIFRS periods. In the whole period results, sign of the SMARKET_BVPS is positive which means SMARKET have a positive incremental effect on BVPS in beforeIFRS period. However, in the beforeIFRS regression results, the sign of SMARKET_BVPS is negative which contradicts with the whole period results. There are some other inconsistencies like this but I think if I can understand the reason of one, others will also be clear for me.
I would aprreciate if you tell me what is wrong with my model or my interpretations regarding regression results.
Thanks in advance
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