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  • A question about the determination of funding size

    Dear all,

    I have the following question:

    I would like to examine what factors determine the IPO size. But it is a two-step question: step 1: what determines whether the IPO is successful (in my sample there is a probability of IPO failure). 2. conditioning on an IPO success, we will explore the factors that will affect the money raised of an IPO.

    Can I ask what type of model I can use to tackle this question? Thank you.

    best
    Joe

  • #2
    The nature of your dependent variable will guide the choice of model.

    What determines whether the IPO is successful (in my sample there is a probability of IPO failure).
    This is a binary outcome (success/ failure), so you should look at logit or probit on the full sample of ventures.

    2. conditioning on an IPO success, we will explore the factors that will affect the money raised of an IPO
    The amount raised is continuous, so linear regression will do on the sample of successful firms.

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    • #3
      Thank you, Andrew. But what I mean is, i remember there should be one single model that estimate the two steps together. Can i do that? Thanks.

      Comment


      • #4
        Yes, it is more than likely that factors that affect venture success also affect IPO size. In this case, look at instrumental variable regression (two-stage least squares)

        Code:
        help ivregress 2sls
        ADDED IN EDIT: The procedure with first stage probit then regression addressing potential endogeneity is described here:

        https://www.stata.com/statalist/arch.../msg00339.html
        Last edited by Andrew Musau; 15 Nov 2018, 07:53.

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        • #5
          Thank you, Andrew.

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