Question
Researchers investigated the relationship of insider ownership, debt, and dividend policies in companies. One of their findings was that firms with high insider ownership choose
Researchers investigated the relationship of insider ownership, debt, and dividend policies in companies. One of their findings was that firms with high insider ownership choose lower levels of both debt and dividends. Shown here is a sample of data of these three variables for 11 different industries
Industry | Insider Ownership | Debt Ratio | Dividend Payout |
Mining | 8.2 | 14.2 | 10.4 |
Food and beverage | 18.4 | 20.8 | 14.3 |
Furniture | 11.8 | 18.6 | 12.1 |
Publishing | 28.0 | 18.5 | 11.8 |
Petroleum refining | 7.4 | 28.2 | 10.6 |
Glass and cement | 15.4 | 24.7 | 12.6 |
Motor vehicle | 15.7 | 15.6 | 12.6 |
Department store | 18.4 | 21.7 | 7.2 |
Restaurant | 13.4 | 23.0 | 11.3 |
Amusement | 18.1 | 46.7 | 4.1 |
Hospital | 10.0 | 35.8 | 9.0 |
Required;
(i) Use the Excels Data Analysis to compute the correlation coefficient, r between each pair. Comment on your results
(ii) Using the Excel Software, develop the equation of the multiple regression model to predict insider ownership by debt ratio and dividend payout.
(iii) Discuss the partial regression coefficients obtained in (ii) above
(iv) Predict the percentage changes in insider ownership of the company whose debt ratio is 50.5 and Dividend payout is 15.5.
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