Hi Guys,

I'm currently writing my thesis about the influence of the tenure of outside directors on earnings quality. Within this subject, I also want to investigate whether companies of which one of the outside directors has financial expertise show a different effect in relation to the earnings quality. I have broken down a sample of companies from the USA in the period from 2010-2019 with several outside directors per company year and I want to use a dummy variable that shows the value of 1 as soon as at least one outside director has financial expertise in a company year. I have currently created the following do file to create this dummy variable:

gen OUTSIDE = 0
replace OUTSIDE = 1 if (classification=="I")
drop if OUTSIDE == 0
gen cusip_6d = substr(CUSIP, 1, 6)
drop CUSIP
gen Financial_Expertise = 0
replace Financial_Expertise = 1 if Financial_Expert == "Yes"
sort cusip_6d year
duplicates drop cusip_6d year, force


I have attached a snap of the cleansed data which is generated after implementing the do-file. As you can see you get to see a dummy variable but it occasionally indicates a value of 0 while in that company-year there is indeed an outside director with financial expertise. This is for example the case for the first dummy-variable of AAON.

Do you guys have any idea how I can adjust my do-file so that the dummy variable shows a 'correct' value in terms of the presence of a financial expert per company year?

I would love to hear from you and thank you in advance

Kind Regards,
Roy