Dear all,

according to Allayannis and Weston (2001) I am trying to do a fixed effects regression with an industry diversification (idivers) variable. The variable is 1 if the firm operates in two or more industry segments and zero otherwise. For classifying in different industry segments I am using SICCODES.

I am using the following setup:
Code:
tsset id year
xtreg y x1 x2 x3 idivers i.year, fe cluster(id)
I want to control for time and industry fixed effects. Therefore I have some questions:

1. As I learned so far I can't include i.industry in the model because the company effects, which I declare via "tsset id" already contain these industry effects, right?

2. Stata always ommits my idivers variable because of collinearity. Is this industry diversification also contained in the company effects?

3. How can authors like Allayannis and Weston estimate a fixed effects model containing a industry diversification variable and controlling for time and industry effects?

Best regards,

Ikn