Dear all,

I am examining the impact of merger activities on the costs of firms. The purpose is the check whether firms realised cost savings due to mergers over the years 2000 - 2014. I have a control group, which consists of firms which were never involved in acquisitions (either as target or acquirer) and a target group, which consists of firms which participated in merger activities. I want to compare the cost trends of both groups during the specified period. I am planning to use a fixed effects model with firm and time fixed effects. I will use a dummy 'target' which indicates the year in which a firm merged and a dummy 'target_post" for all years after the merger. However, I am a bit confused on how to include the control group in the analysis. I was thinking about using the xtreg command with the fe option while clustering on id number (unique identifier for each firm), but I am not sure if State then includes the control group in the main analysis?

I would appreciate it very much if someone could help me out with this!
Kind regards,
Noella