Hi,

I am dealing w/ panel data and am running 3 regressions based on a dummy variable that indicates credit rating category.

I hypothesize that the effect of my dependant variable is different for BBB- and BB-rated firms, compared to other categories. This hypothesis is supported in a regression on a dummy that grouped both categories (dummy is BORDERLINE=1 if BBB or BB, 0 otherwise)

Now Iwant to check if there's a difference BETWEEN BBB and BB-rated firms. I run a regression on a dummy for BBB (=0 if BB and =1 if BBB). I find no statistically sign differences. The same goes when i drop BBB and regress on BB (=1 if BB, 0 otherwise): the coefficient on BB is significant just like in the original model.

BUT if i regress on BB, and BBB is still in the sample, the coefficient on BB becomes insignificant. This seems to be suggesting to me that this result is driven by the BBB group (because if I drop the group, my results are significant again).

I am really puzzled and cannot see where I am going wrong. Any help is greatly appreciated. These are my commands:


Code:
reghdfe ABPROD BB POST POST_BB DSIZE DLEV DBTM DROA DMKTCAP ABACC, a(sic) cluster(gvkey)

reghdfe ABCFO BB POST POST_BB DSIZE DLEV DBTM DROA DMKTCAP ABACC, a(sic) cluster(gvkey)

reghdfe ABDEXP BB POST POST_BB DSIZE DLEV DBTM DROA DMKTCAP ABACC, a(sic) cluster(gvkey)
and

Code:
reghdfe ABPROD BB BBB POST POST_BB POST_BBB DSIZE DLEV DBTM DROA DMKTCAP ABACC, a(sic) cluster(gvkey)

reghdfe ABCFO BB BBB POST POST_BB POST_BBB DSIZE DLEV DBTM DROA DMKTCAP ABACC, a(sic)  cluster(gvkey)

reghdfe ABDEXP BB BBB POST POST_BB POST_BBB DSIZE DLEV DBTM DROA DMKTCAP ABACC, a(sic)  cluster(gvkey)

Code:
* Example generated by -dataex-. To install: ssc install dataex
clear
input float(ABPROD ABCFO ABDEXP BB BBB POST POST_BB POST_BBB DLEV DBTM DROA DMKTCAP ABACC)
 -.4810379   .04284381   .19333053 0 1 1 0 1     .02239153   .06645611   .009054802  -.4833498   .011106037
  -.459157  -.12642342   -.4319657 0 1 1 0 1     .09965995  -.21559973  -.024933025  .59500027   -.08163384
 -1.300065    .1522476    .4984799 0 1 0 0 0     .26993334  -.22669765   -.06229464 -2.3688588  -.030829877
  4.706125   .02665633    .9036945 0 0 1 0 0    -.14888379    .3459623   -.05360043   .9831181   -.27593714
  .8380138   .11506019   .27434856 0 1 0 0 0     .01545021   .34139705   -.02990166 -.08981514  .0044926815
 -.3454487   .06597797    .1759018 0 1 1 0 1      .0492405    .1137682  -.015081085   -.743556    .01789485
 -.8152007   .06270685   .14974438 1 0 1 1 0     .07131219  -.06642078    .02008979   .7725134   .011752755
-.19864947  .004033111   .19637266 1 0 1 1 0     .14323208  -.07465684  -.016898055 .015629768    .00585511
 -.2320367  .009455089    .1015376 0 0 0 0 0     -.1609961  -.03709486   -.14204419  .19658756   .014677214
  -.715627   -.0248072 -.033708036 0 1 0 0 0    -.03777611   -.0948762   .009337235   1.026124   .008401591
  -2.82628    .0879458   .18102677 1 0 0 0 0     .14156628   .25987574   -.02313412  -.3556175    .04160918
 -.5977436    .0847985    .1792068 0 1 0 0 0      .2517762   -.1619529   -.04731052 -2.3688588    .02133837
 -1.234003    .0930773   .15479743 0 1 0 0 0      -.214898   -.0812833    .04250089  -1.267827    -.0992441
 -.4834971   .04756335   .12464893 0 0 0 0 0    -.08811246   -.1838577   .029348217 -.05011272    .01995336
  .7980459   -.3754891 -.068353236 1 0 1 1 0      .1827543  -.04714134  -.010735143   .5848131  -.002157852
 -.3265761   -.3018787   -.9464616 0 0 0 0 0     -.2052811  -.23008497     .0758987   2.489741    .01599034
-.17988718  .008382857  .002093047 0 1 1 0 1   -.011945784  -.18164924    .01913097  .04573917    .04071428
 -.5866979   .09812048   .14634906 0 1 0 0 0     -.1130022  -.28699452    .08642069   -.758657   .016466357
 -.4518611  -.02626838   -.1047811 0 0 1 0 0    -.02155152   -.2230437    .10886978   .3874397    .24920166
-.54380566   .04394566    .1087121 0 0 1 0 0    -.12601346    .3023307    .07393778   .6739273  .0002500474
 -.6620796  -.12187499  -.16851103 0 0 0 0 0    -.18039754   -.2343094    .08915447    .525754    .06038114
 -.6115122  -.24963057   -.9726012 0 0 0 0 0    -.08968538   -.4244614    .10886978  2.6230116    -.3829603
 .02107686   .00986407   .14621753 0 0 0 0 0    -.12901816  -.21625085    .08508142    .263546 -.0015831132
.005771875   .03987329    .2011584 1 0 0 0 0     .08769268    .3156319   -.04923168  -.6088591   -.03409957
  -.451338   .07268049   .13510521 0 0 0 0 0   -.007330626  -.18931387    .03785834 -.14580631   .004762132
  .6021659   .12944469    .2870493 0 0 0 0 0    -.10253483  .009720683   .018324412  -.6967669    .02360546
-.39763245   .05861616    .2513983 1 0 1 1 0    .024024397     .638991   -.04903502 -1.9045215  -.001827065
 -1.359185   .14985806    .8371469 0 0 0 0 0     .26993334  -.06263831   -.04369945 -2.3688588  -.030220807
 -.3434596  -1.0965811  -2.4614234 0 0 1 0 0    -.05840309  -.17635524   .013715878  2.6230116   -.15901685
 -.7824444   .07249321   .15791577 0 1 0 0 0     -.1647576 -.015375286    .02000135 -1.5726423  -.014109032
 -.6428278  .068383396   .14660533 0 1 0 0 0      -.214898  -.10579348    .02148174  -.9261489  -.003248749
 -.5599841   .08938036   .19607723 0 0 0 0 0    -.07138254   -.2632391   -.07092695  -.3965082    .02083324
  6.575737   .16245747   1.0850059 0 1 0 0 0    -.15812314    .3663347    .01406611  .26634407   -.29398662
 -1.338295   .08017698   .14710796 0 1 1 0 1   -.017841667  -.15771052   .016152345  -.9167547   .007668108
 -.3215057   .03343731   .11093793 0 1 0 0 0    .020111024   -.0119586  .0026631765   .1572857  .0046297293
  -.678668   .07228784     .042449 0 1 1 0 1  -.0008630455 .0013207495  -.013631701   -1.23232  .0008781739
 -.3961801   .07186599   .16356237 0 1 0 0 0      -.214898   .06683624  -.014435984 -1.7421494   .007116792
  3.543555    .6558267   1.2190458 0 1 0 0 0    -.05171567   .21195766   -.02246403  .10090733     .4988182
  .2070296   .05173666   .06044927 0 1 0 0 0     .03692487  .006587029  -.010857876  .46269035   .022039976
 .28233343  -.07321987 -.028787047 0 1 0 0 0    .013950914   -.2596729    .03418533  1.2468872  .0029907934
 -.3707602  -.07224434   .04144168 0 1 0 0 0    -.16184503    .3998029   -.02434896   .4202232    .02917838
-.11695898  -.10312417  -.11185694 0 0 0 0 0     .08996752   -.3406595    .03332217   .4068327  .0014692843
  6.190328  -.18122625    .7292051 0 1 1 0 1   -.066605896   .06702483    .00645969   .6358356   -.09672442
-.09559023 -.065959945 -.011538923 0 1 1 0 1 -.00010865927   -.2147754   .012226328  .16749954   -.02519911
  -.985707   .11163177       .6176 0 0 0 0 0    -.05029216    .1345559   .031757746 -2.2393432  -.019436546
 -.2742213   -.3135095     -.85346 0 0 0 0 0     -.1668375  -.20959136    .10886978   2.567255    .05932437
-.08394842  .031130625   .16665825 0 1 0 0 0      .2364482  -.20953003   -.05066036 -2.3688588    .01211923
 -.4986563   -.5217433  -1.4149845 0 0 0 0 0     -.1595535  -.19645943    .08632505   2.421796    .00935784
  .3359966  -.25478125  -.29230756 0 1 1 0 1    -.02436045  -.20339875   .016495787   1.321416    -.0840695
-.31689075   .05285981   .15546696 0 0 1 0 0      .1608813   .26369193    -.0973421   -2.20714    .01518241
-1.8894062   -.2058984    -.920289 0 0 1 0 0     -.0999229    .3334708    .05328922  2.6230116     .3386431
  4.934252   .55085135    .8624532 0 0 0 0 0      -.076968   .14259681    .03978743  1.0236301      .468101
 -3.703889    .6558267   1.2190458 0 0 0 0 0    -.06160341 .0019658208   .002566472  1.2361164    1.2244806
-.24524784  -.03744864   1.2190458 0 0 0 0 0    -.06787203   .21891928  -.011531182   .6849632   -.19233137
  .7306615   .10452186    .2871676 0 0 0 0 0     -.0562349   .47409275  -.012342013  -.4536104    .04498736
  6.490494    .6558267    .8850858 0 1 1 0 1     -.1564339     .531631   -.05399811   .2790413     .2779966
 -.4177584   .06298278   .09010823 0 0 1 0 0     .12560925    .1947045    .08294106   .7997656    .02151272
  .8694983   .18335247   .28074327 0 1 0 0 0    -.10995477   .06666309  -.007635355   .6130295    .10309126
 1.8987198    .1782948     .362823 0 1 0 0 0     .02448526    .4129755   -.04360794 -.27884007   .006104112
 -.0930544 -.016600255   .15773863 0 0 0 0 0     .03521791   -.3200078   -.01035324  .15719032   -.02048438
  4.089712   -.8546776  -1.5426483 0 1 0 0 0      .0395847     .327564   -.04150825  .05615234    -.9627623
 -.4226729   .04727279   .08642544 0 0 0 0 0     .11272103  -.06873232   .008321285   .4874773   .009369425
-.22340345   -.5036356  -1.3604767 0 0 0 0 0    -.18478063  -.24119733     .0802584  2.6230116    -.1057562
 -.7681581   .07194191   .04357007 0 1 0 0 0    -.13215522     .096816 -.0045735687   .6231031   .034494095
 .28593576   .04195842    .3008011 0 0 0 0 0      -.214898  -.01918179    .03320433 -.23231792  -.014999125
  .2066605  -.22111136  -.21555716 0 1 1 0 1    .006663561   -.1571926    .00594271   .8300276  -.006479383
 .15533984    .0074763   .21269843 0 0 1 0 0      -.214898  -.07079822    .07456709   .3545494   .011655033
  2.353253   -.7008798   -1.716687 0 0 0 0 0    -.04700428   .18904576  -.013694722    1.87751   -.22915673
 -.9464624   .07928365   .20781803 1 0 0 0 0     .06724885    .1513186   -.14204419  -.9212565    .02178305
 -.2056771   .02303327  -.11127976 0 0 0 0 0    .008986145  -.26674387   -.10437547  1.0591078  -.008781832
  .7316122   -.1942073   -.8011978 0 1 1 0 1    -.07956778   .28728366   -.05503028  1.7269335   -.15486786
 -.4873989   .08145023    .2499372 0 0 0 0 0     .07978526   .18608585  -.017326102 -1.9864936   .003878923
  .2211717  -.05947895  .005255997 0 1 1 0 1     -.0839581    .0903244   .035817385  1.7011023    .11724854
-1.2543833   -.3843942   -.7918581 0 0 1 0 0    -.08138417  -.14122604   .009399667  2.6230116   -.10137714
 -.6423759   .06036171   .12664863 0 1 0 0 0      .1444354  -.28723982  .0009216666   .8615055   .012001972
 -1.622652    .6558267   -.3636122 0 1 0 0 0   .0045811534  .007061422    .01292551    .531682      .932229
 -.7263823   .08900919   .04766238 0 1 1 0 1      .0853236  -.11844198   .029790573  -.8711672   .022006113
 .15042377   -.3067124   -.4166497 0 1 0 0 0   -.009675115  -.04056373  -.011263348    .853529   -.04261482
-.48701045   .05131045   .08229365 0 1 0 0 0     .09286702  -.25720364    .02540642    .915926   .016659167
  .4990523   .16961294    .3508794 0 0 0 0 0    -.10731162 -.013654828   .007577583  -.6556473    .02226732
-.34799075   .06097425    .1701512 0 0 1 0 0     .09840968    .3743122   -.03976301 -2.3521905  -.016260754
 -3.703889    .3040011  -.14901876 0 0 1 0 0       .042968   -.1676498  .0044059902   2.472422    -.4726424
  1.065859    .2216068    .3573781 0 0 0 0 0    -.05211303    .3536803   -.04968844   .3390703    .11275016
-.52443475   .07906865   .17462453 0 1 0 0 0     .12620062  -.18152496   -.05182426 -2.3688588    .01916144
 .02424443  -.08669466   .10222077 0 1 1 0 1    -.06944695  -.04080316  -.029763523  .11750984   -.07534757
 .09968364  -.02535102     -.31834 0 1 0 0 0     .07974762    .1874525  -.022953764   .2502184   -.12559082
 -.1143702   .03728192    .1513203 0 1 0 0 0     -.0645847  .018358856  -.009343512  .52766037   .009463292
 -.3900698   .07909027   .13369954 1 0 0 0 0     .15653814   .18990925   -.03766808   -.458807   .013618034
-.09578115    .0396736   .14168409 0 1 0 0 0     .00586626  .015191764   -.01885159   .4989691 .00027564168
  -.161929  .033354476    .3629563 1 0 1 1 0      .0837571    .7744017   -.05775796  -2.009583   -.05239499
 -.3311968    .0424498   .14669132 0 1 0 0 0     .26993334  -.53065443  -.020774815   .3745766  .0037157456
 -.5663498     .053633   .08888848 0 1 0 0 0    .016336054   .12369642  -.010766137   .3763018    .01513172
 .23136735    .0547114   .20643425 0 0 0 0 0    -.13352382  -.02835122   .034572423  -.4694967   -.02562396
 .14318705  -1.1247151   -2.925778 0 0 0 0 0    -.13146679   -.2774393    .10360639  2.6230116    .16855906
  -.605824     -.99393    -2.98844 0 0 1 0 0     .06168923   -.2154261    .02044995   2.348339   -.27652937
 -.3820366   .02746498   .02071363 0 1 1 0 1     .13830107   -.1987787   .033110313   .7278137   .034568604
 -.8494035  -.07682256  -.12016487 0 0 1 0 0     -.0281024  -.25267512    .09584643   .5820551    .02357947
  -.953091  -.20189205   -.3709978 0 0 0 0 0    -.16152473   -.3077904    .09343599  .36945915  -.006033178
 -.7190662   .12319106   .23845658 0 1 1 0 1      .0785244   -.2042193   -.05144642 -2.3688588   .022634376
 -.6230433    .0885924    .1774279 0 1 1 0 1     .05852085   -.0807594   -.04484974 -2.3688588    .01980174
end