Hi Statalist,


I have a question about firm-fixed effects.

My regression looks like:

Dependent var = independent var + controls

My dependent var is a continuous variable, and my independent var is a dummy variable. This dummy variable can, of course, be 1 or 0. It can go from 1 to 0 in consecutive years, but NOT from 0 to 1.

I made paneldata by xtset CIK fyear, where CIK is the company identifier.

My research supervisor said that when I include firm-fixed effects, for the B1 coefficient stata only looks at those firms that go from 1 to 0 in consecutive years (because all other firm-years are 'constant').

Is this true, and can anyone elaborate on this so that I will be able to defend this story more strongly?
If you need more information please feel free to ask...