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# Re: st: indicator variable and interaction term different signs but both significant

 From Anthony Fulginiti To statalist@hsphsun2.harvard.edu Subject Re: st: indicator variable and interaction term different signs but both significant Date Sat, 6 Apr 2013 15:24:50 -0700

Hi Nahla,

I would recommend waiting for others on Statalist to respond to provide confirmation of my interpretation.  However, my thoughts are that this is suggesting that your main effect for overconfidence is suggesting that overconfident managers manipulate earnings less than other managers (if that is the reference group) at market value 0.  The interaction would then suggest that the effect of the overconfidence variable on earnings manipulation is increasingly greater at higher market values.  I look forward to hearing other replies.

Anthony

On Apr 6, 2013, at 2:45 PM, Nahla Betelmal wrote:

> Dear Statalist,
>
> I am having difficulty interpreting the results from OSL regression. I
> am trying to see whether Overconfident managers manipulate earnings in
> a certain context.
>
> The dependent variable earnings_Mgt is continuous  The problem is that
> the indicator variable for overconfidence (OC_D) is negative and
> significant, while the interaction between the indicator variable and
> market_value variable (OC_MV) is positive and significant. What does
> that mean?
> Does it mean that overconfident managers manipulate earnings less than
> others (rational managers), but when the market value is high they
> manipulate earnings more than rational managers do?
>
> Your help is highly appreciated,
>
> many thanks
>
> Nahla Betelmal
>
>
> Linear regression		 Number of obs	= 56
> F( 8, 47)	= 3.60
> Prob > F	= 0.0025
> R-squared	= 0.3719
> Root MSE	= .08355
> Robust
> earnings Mgt       Coef.	Std. Err.	t	  P>t	        [95% Conf.	Interval]
> size                .0058268	.0092169	0.63	  0.530	-.0127153	.0243689
> leverage          .0924198	.0724032	1.28	  0.208	-.0532367	.2380763
> MV                 .0046896	.0032752	1.43	  0.159	-.0018993	.0112784
> litigation          .0310148	.0267527	1.16	   0.252	-.0228048	.0848344
> private_D        -.0638102	.023056	-2.77	0.008	-.110193	-.0174275
> same_D            -.08197	.0273465	-3.00	0.004	-.136984	-.026956
> OC_D            -.0730767	.0288269	-2.54	0.015	-.131069	-.0150844
> OC_MV          .0105348	.0049493	2.13	0.039	.000578	.0204916
> _cons              .0381444	.0615391	0.62	0.538	-.0856564	.1619452
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