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Re: st: very small sample comarsion


From   Gordon Hughes <G.A.Hughes@ed.ac.uk>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: very small sample comarsion
Date   Sun, 27 Feb 2011 11:11:01 +0000

Dr. Conroy is entirely correct that the interest in this data lies in whether there is some change in trend after the entry of a new CEO relative to the performance of either the industry or the company before the change. But you need to think about one additional feature: the fact that there has been a change in CEO is not random. A few CEO's may leave because of age or ill-health, but many will leave because the performance of the company was disappointing.

In practice, what you are really trying to isolate is whether a change in CEO leads to a change in the performance of the company conditional on the economic environment, its competitors and the fact that the change was often prompted by a belief that a newcomer ought to be able to do better. I would not be confident that 50 companies and ~200 changes of CEO is sufficient to do this, but that is the basic character of your sample. So your model might express growth in real assets or profits as a function of current & (variously) lagged GDP growth, industry growth, other industry characteristics plus whether there was a change in CEO 1, 2, .. years ago. You could treat that as either being endogenous (using instrumental variables) or using a sample selection model.

Gordon Hughes
g.a.hughes@ed.ac.uk

------------------------------

Date: Sat, 26 Feb 2011 16:23:36 +0000
From: Ronan Conroy <rconroy@rcsi.ie>
Subject: Re: st: Re: very small sample comarsion

On 26 Feb 2011, at 13:51, ajjee wrote:

> Thanks Mr.Ronan for reply
>
> I've panel data of near 50 firms for 15 years. I want to anlyse the
> performance of CEO of each firm.

Are you sure? I don't think that the individual performance of each CEO is interesting. I think that the interesting thing is the arrival of a new CEO.

So your data structure is that you have, as your predictor variable, the time since the new CEO took over, and as a predicted variable you have the change in CAR for that year. Or something like that ­ I'm not an economist (and clearly no-one in Ireland is!). Your data are clustered by company. Or so it seems from your description of your hypothesis. Certainly, analysing each individual CEO won't get you any nearer to it.

> Each CEO has 3 or 5 years in office. So I
> have many indicators from the company's balance sheet and I want to check
> improvement/distortion in these indicators before and after a new CEO comes.
> Suppose I want to analsye capital to assets ratio (CAR), for this purpose I
> computed 3/5 year average of CAR and then compare these averages before and
> after the new CEO appointment. But it is very crude measure to evaluate the
> performance.  About the independence of the samples, the firms are
> independent, of course, but within firm, sample are not independent.

Ronán Conroy
rconroy@rcsi.ie
Associate Professor
Division of Population Health Sciences
Royal College of Surgeons in Ireland
Beaux Lane House
Dublin 2


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