Question : Statistical Analysis: Interpret the parameters estimated using all firms sample in table three. Are the coefficients statistically significant?
Theory and Evidence 873 Table III Ordinary Least Squares Regression Results of Firm Debt to Value Ratio on Firm Volatility, Non-Debt Tax Shields and Advertising plus Research and Development Expenses, with and without Industry Dummy Variables for All and Non-Regulated Firms. All Firma Non-Regulated Firms Firms 821 655 Industries 25 21 With Industry With Industry Without Industry Dummy Vari- Without Industry Dummy Vari- Dummy Variables ables Dummy Variables ables Constant .330 .225 .202 .191 (19.96) (7.30) (11.24) (4.77) Firm Volatility -1.73 -0.645 -0.806 -0.579 (-12.33) (-4.66) (-5.85) (-3.94) Non-Debt Tax -370 .308 .423 .316 Shields (7.61) (6.51) (8.51) (6.12) Advertising and |--2.42 --O.98 -1.34 -0.956 R & D Ex- (-13.13) (-4.43) (-7.53) (-4.13) pense R-SQRD .342 .586 .236 .337 F-Statistic 141.78 41.63 67.11 13.92 Firm Debt to Value Ratio is calculated as 20-year (1962-1981) sum of annual book value of long- term debt divided by the sum of long-term debt and the market value of equity. Firm Volatility is calculated as the standard deviation of the first difference in annual earnings before interest, depreciation and taxes over the period 19621981 divided by the average value of total assets over the same time period. The level of firm Non-Debt Tax Shields is calculated as the ratio of the 20-year (1962-1981) sum of annual depreciation plus investment tax credits divided by the sum of annual earnings before interest, depreciation and taxes over the same period. The level of firm Advertising plus Research and Development expenses is given by the 10-year (19711982) sum of annual advertising, plus research and development expenses divided by the sum of annual net sales over the same period. Theory and Evidence 873 Table III Ordinary Least Squares Regression Results of Firm Debt to Value Ratio on Firm Volatility, Non-Debt Tax Shields and Advertising plus Research and Development Expenses, with and without Industry Dummy Variables for All and Non-Regulated Firms. All Firma Non-Regulated Firms Firms 821 655 Industries 25 21 With Industry With Industry Without Industry Dummy Vari- Without Industry Dummy Vari- Dummy Variables ables Dummy Variables ables Constant .330 .225 .202 .191 (19.96) (7.30) (11.24) (4.77) Firm Volatility -1.73 -0.645 -0.806 -0.579 (-12.33) (-4.66) (-5.85) (-3.94) Non-Debt Tax -370 .308 .423 .316 Shields (7.61) (6.51) (8.51) (6.12) Advertising and |--2.42 --O.98 -1.34 -0.956 R & D Ex- (-13.13) (-4.43) (-7.53) (-4.13) pense R-SQRD .342 .586 .236 .337 F-Statistic 141.78 41.63 67.11 13.92 Firm Debt to Value Ratio is calculated as 20-year (1962-1981) sum of annual book value of long- term debt divided by the sum of long-term debt and the market value of equity. Firm Volatility is calculated as the standard deviation of the first difference in annual earnings before interest, depreciation and taxes over the period 19621981 divided by the average value of total assets over the same time period. The level of firm Non-Debt Tax Shields is calculated as the ratio of the 20-year (1962-1981) sum of annual depreciation plus investment tax credits divided by the sum of annual earnings before interest, depreciation and taxes over the same period. The level of firm Advertising plus Research and Development expenses is given by the 10-year (19711982) sum of annual advertising, plus research and development expenses divided by the sum of annual net sales over the same period
