Hello,
I'm doing my master thesis and I'm using a multitple linear regression. I'm regressing CSR performance of 2017 on CSR contracting and I'm controlling
for various control variables : CSR performance of 2016, ROA, Size, Leverage and R&D Intensity.
Controlling for Industries is also important according to the literrature and past studies have included the lagged dependant variable as an explanatory variable (CSR Performance 2016 is a control variable while CSR Performance 2017 is my dependant variable) so I simply followed them.
My question refers more to the intuitition behind those two concepts of controlling for industries and including a lag dependant variable.
I explain myself : If I understand well, controlling for industries allows me to control for industry fixed effects which are effects that are unobservable
and that varies between the different categories of industries. Is my intuition correct?
Also I'm controlling for the CSR performance of 2016 which corresponds to my dependant variable (CSR performance 2017) but one year before. and again
I'm not sure whether my intuition is correct or not. My intuition: controlling for CSR Performance 2016 allows me to control for observable and unobservable past information
for each firm. But one problem here is that I can't control for unobservable effects that varies accross time. Is my intuition correct again?