Introductory Econometrics: A Modern Approach 6th Edition by Jeffrey M Wooldridge

Exercise 22

The following table was created using the data in CEOSAL2.RAW:

The variable mktval is market value of the firm, profmarg is profit as a percentage of sales, ceoten is years as CEO with the current company, and comten is total years with the company.

(i) Comment on the effect of profmarg on CEO salary.

(ii) Does market value have a significant effect? Explain.

(iii) I nterpret the coefficients on ceoten and comten. Are these explanatory variables statistically significant?

(iv) What do you make of the fact that longer tenure with the company, holding the other factors fixed, is associated with a lower salary?

Step 1 of 5

The dependent variable is log(Salary) and independent variables are log(sales), log(mktval), profmarg, ceoten, comten, intercept, Observations, and R-Squared.

Table 1.1 shows the demanded and independent variables.

Here,

The market value of the firm is represented by the variable mktval,

Profit as a percentage of sales is represented by the variable profmarg,

Years as CEO with the current company is represented by the variable ceoten, and

Total years with the company is represented by the variable comten.