Hi, I am running some analysis on US Industrial companies (years 2000-2019) to study the effect of geographic segment diversification (GSD, log-transformed and lagged) on firm performance (EBIT_ROA, log transformed.) I use GSD in linear and quadratic forms. The regression gives a coefficient of -.0991237 (significant) for quadratic GSD. These results are produced below under bullet "A - Regression with Quadratic GSD". Now I created an interaction for the global financial crisis (I have created a categorical variable "Crisis" with values 1= pre-crisis, 2= crisis, 3= post-crisis) and find that the interaction of crisis with quadratic GSD is significant. The results are produced in B - Regression with Quadratic GSD & Crisis Interaction. In the interaction regression results, I find that quadratic GSD is no longer significant although the quadratic GSD interacted with crisis is significant. I was hoping to get some help on how to interpret such a result.
A - Regression with Quadratic GSD
B - Regression with Quadratic GSD & Crisis Interaction
A - Regression with Quadratic GSD
Code:
. xtreg Ln_EBIT_ROA Ln_Revenue Ln_LTD_to_Sales Ln_Intangible_Assets CoAge wGDPpc wCPI wDCF wExpgr
> wGDPgr wCons Ln_PS_RD c.l1.Ln_GSD##c.l1.Ln_GSD if CoAge>=0 & NATION=="UNITED STATES" & NATIONC
> ODE==840 & FSTS>=10 & FSTS <=100 & GENERALINDUSTRYCLASSIFICATION ==1 & Year_<2020 & Year_<YearIn
> active & Discr_GS_Rev!=1, fe cluster(n_WSID)
Fixed-effects (within) regression Number of obs = 1,080
Group variable: n_WSID Number of groups = 215
R-sq: Obs per group:
within = 0.1161 min = 1
between = 0.0028 avg = 5.0
overall = 0.0000 max = 19
F(11,214) = .
corr(u_i, Xb) = -0.8655 Prob > F = .
(Std. Err. adjusted for 215 clusters in n_WSID)
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| Robust
Ln_EBIT_ROA | Coef. Std. Err. t P>|t| [95% Conf. Interval]
---------------------+----------------------------------------------------------------
Ln_Revenue | .5227131 .1484644 3.52 0.001 .2300733 .8153529
Ln_LTD_to_Sales | -.1259449 .0420909 -2.99 0.003 -.2089107 -.0429792
Ln_Intangible_Assets | -.1111652 .0606124 -1.83 0.068 -.2306389 .0083085
CoAge | -.0207395 .0128813 -1.61 0.109 -.0461301 .004651
wGDPpc | .0000447 .0000238 1.88 0.062 -2.23e-06 .0000916
wCPI | .0088375 .0228297 0.39 0.699 -.0361624 .0538374
wDCF | 9.60e-14 1.29e-13 0.74 0.458 -1.58e-13 3.50e-13
wExpgr | -.0035418 .0101196 -0.35 0.727 -.0234887 .0164051
wGDPgr | .0354974 .030715 1.16 0.249 -.0250454 .0960402
wCons | -5.00e-15 4.48e-14 -0.11 0.911 -9.33e-14 8.32e-14
Ln_PS_RD | -.0533373 .0488165 -1.09 0.276 -.1495601 .0428855
|
Ln_GSD |
L1. | -.6912847 .202656 -3.41 0.001 -1.090742 -.2918272
|
cL.Ln_GSD#cL.Ln_GSD | -.0991237 .0373107 -2.66 0.008 -.1726672 -.0255802
|
_cons | -12.11932 2.610238 -4.64 0.000 -17.26439 -6.974254
---------------------+----------------------------------------------------------------
sigma_u | 1.3840627
sigma_e | .5932136
rho | .8448082 (fraction of variance due to u_i)
--------------------------------------------------------------------------------------
Code:
. xtreg Ln_EBIT_ROA Ln_Revenue Ln_LTD_to_Sales Ln_Intangible_Assets CoAge wGDPpc wCPI wDCF wExpgr
> wGDPgr wCons Ln_PS_RD c.l1.Ln_GSD##c.l1.Ln_GSD##ib2.crisis if CoAge>=0 & NATION=="UNITED STATE
> S" & NATIONCODE==840 & FSTS>=10 & FSTS <=100 & GENERALINDUSTRYCLASSIFICATION ==1 & Year_<2020 &
> Year_<YearInactive & Discr_GS_Rev!=1, fe cluster(n_WSID)
Fixed-effects (within) regression Number of obs = 1,080
Group variable: n_WSID Number of groups = 215
R-sq: Obs per group:
within = 0.1280 min = 1
between = 0.0043 avg = 5.0
overall = 0.0123 max = 19
F(17,214) = .
corr(u_i, Xb) = -0.7239 Prob > F = .
(Std. Err. adjusted for 215 clusters in n_WSID)
--------------------------------------------------------------------------------------------
| Robust
Ln_EBIT_ROA | Coef. Std. Err. t P>|t| [95% Conf. Interval]
---------------------------+----------------------------------------------------------------
Ln_Revenue | .5231021 .1499161 3.49 0.001 .2276008 .8186035
Ln_LTD_to_Sales | -.125481 .0419333 -2.99 0.003 -.2081362 -.0428258
Ln_Intangible_Assets | -.1103335 .0615829 -1.79 0.075 -.2317202 .0110532
CoAge | -.0029363 .0166989 -0.18 0.861 -.0358517 .0299791
wGDPpc | .0000298 .0000218 1.37 0.172 -.0000131 .0000727
wCPI | .0060675 .0254869 0.24 0.812 -.04417 .056305
wDCF | 1.36e-13 1.27e-13 1.07 0.285 -1.14e-13 3.85e-13
wExpgr | .0126791 .0125128 1.01 0.312 -.0119851 .0373433
wGDPgr | .0115004 .0300052 0.38 0.702 -.0476431 .070644
wCons | -2.27e-14 4.36e-14 -0.52 0.603 -1.09e-13 6.32e-14
Ln_PS_RD | -.04777 .0474308 -1.01 0.315 -.1412614 .0457213
|
Ln_GSD |
L1. | -.49074 .2583853 -1.90 0.059 -1.000046 .0185662
|
cL.Ln_GSD#cL.Ln_GSD | .177507 .1103887 1.61 0.109 -.0400813 .3950953
|
crisis |
1 | .0000289 .1170896 0.00 1.000 -.2307677 .2308255
3 | -.244763 .1386875 -1.76 0.079 -.5181314 .0286055
|
crisis#cL.Ln_GSD |
1 | -.0697625 .1898751 -0.37 0.714 -.4440274 .3045024
3 | -.1822128 .2083067 -0.87 0.383 -.5928084 .2283829
|
crisis#cL.Ln_GSD#cL.Ln_GSD |
1 | -.2631727 .1049846 -2.51 0.013 -.4701091 -.0562364
3 | -.2041293 .0970556 -2.10 0.037 -.3954366 -.0128219
|
_cons | -13.0135 2.823174 -4.61 0.000 -18.57829 -7.448709
---------------------------+----------------------------------------------------------------
sigma_u | 1.1013267
sigma_e | .59130596
rho | .77623771 (fraction of variance due to u_i)
--------------------------------------------------------------------------------------------
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