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

[Richard Williams <richardwilliams.ndu@gmail.com>]

The coefficient for OC-D is the predicted difference between an 
overconfident manager and a regular manager when MV = 0 and the 
values of other variables are the same for both. Since such a person 
may not even exist (e.g. can MV even equal zero?) this may not be 
particularly interesting. See
http://www3.nd.edu/~rwilliam/xsoc63993/l53.pdf

for a discussion of how to interpret main effects when a model has 
interaction terms and ways to make results more interpretable. In 
your case you might want to center MV (i.e. subtract the mean from 
each case) and possibly other independent variables. Or, try drawing 
some graphs. Or, just don't worry about it too much. Once you add an 
interaction term, the interpretation of the effect of OC_D is very different.
Finally, as a sidelight, I would recommend using factor variable 
notation if you are using Stata 12, because this will let you use the 
margins and marginsplot commands. The above handout shows some examples.
At 04:45 PM 4/6/2013, 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
> *
> *   For searches and help try:
> *   http://www.stata.com/help.cgi?search
> *   http://www.stata.com/support/faqs/resources/statalist-faq/
> *   http://www.ats.ucla.edu/stat/stata/
-------------------------------------------
Richard Williams, Notre Dame Dept of Sociology
OFFICE: (574)631-6668, (574)631-6463
HOME:   (574)289-5227
EMAIL:  Richard.A.Williams.5@ND.Edu
WWW:    http://www.nd.edu/~rwilliam

*
*   For searches and help try:
*   http://www.stata.com/help.cgi?search
*   http://www.stata.com/support/faqs/resources/statalist-faq/
*   http://www.ats.ucla.edu/stat/stata/