I am doing an event study on the impact of ESG on stock returns. I have performed the event study itself and got the values for abnormal returns as well as cumulative abnormal return.
In addition to this, I need to regress the cumulative abnormal returns on a trend, some event-related variables, firm related variables, and firm and industry fixed effects. Thus, the model looks as follows:
CAR = alpha + beta x Trend + gamma*X_i + lambda*Y_i,t + delta_j + theta_s
where, Xi is a vector of variables related to the event, Yi,t is a vector of variables related to the targeted company at time t. Delta is firm fixed effects, and theta is industry fixed effects.
I know that for the industry fixed effects I can use dummy variables, but how do I account for firm fixed effects? What does firm fixed effects include?
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