Hello dear Stata users,

I am doing research on working capital management and firm performance with two-by using the xtabond2 command in Stata. I am going to publish syntax and results of it below.

Question 1. I would ask, whether I can do changes in the lag of instrumental variables when I do regression for "inventory days" and "accounts payables" independent variables and with the different dependent variables (for ex. TobinsQ) as long as I get appropriate results of Sargan/Hansen tests?

Question 2. Can you please explain what does eq(diff) and eq(level) give us? - Sorry, but I could not get clear answers for those.

Question 3. What is the lowest number for chi.sq for Hansen/Sargan?

ARD is Accounts Receivables Days and ARDsq is the square of ARD

xtabond2 ROA l.ROA ARD ARDsq TANG CR SALES LEV GR y* industry*, gmm(l.ROA, l(2 2)) iv(ARD ARDsq TANG CR SALES LEV GR, eq(diff)) iv(ARD ARDsq TANG CR SALES LEV GR y*, eq(level)) nodiffsargan twostep robust

Favoring space over speed. To switch, type or click on mata: mata set matafavor speed, perm.
year1 dropped due to collinearity
year6 dropped due to collinearity
industry6 dropped due to collinearity
industry8 dropped due to collinearity

Warning: Two-step estimated covariance matrix of moments is singular.
Using a generalized inverse to calculate optimal weighting matrix for two-step estimation.

Dynamic panel-data estimation, two-step system GMM
------------------------------------------------------------------------------
Group variable: id Number of obs = 1638
Time variable : Year Number of groups = 227
Number of instruments = 40 Obs per group: min = 1
Wald chi2(26) = 5520.06 avg = 7.22
Prob > chi2 = 0.000 max = 10
------------------------------------------------------------------------------
| Corrected
ROA | Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
ROA Coef. St.Err. --- t-value --- p-value [95% Conf Interval] Sig
L.ROA 0.720 0.145 4.95 0.000 0.435 1.004 ***
ARD -0.003 0.001 -3.49 0.000 -0.005 -0.001 ***
ARDsq 0.000 0.000 2.29 0.022 0.000 0.000 **
TANG -0.184 0.105 -1.76 0.079 -0.389 0.021 *
CR -0.014 0.013 -1.06 0.289 -0.039 0.012
SALES -0.022 0.061 -0.36 0.717 -0.143 0.098
LEV -0.208 0.106 -1.97 0.049 -0.415 -0.001 **
GR 0.218 0.039 5.54 0.000 0.141 0.296 ***
year2 0.037 0.035 1.05 0.293 -0.032 0.106
year3 0.045 0.033 1.36 0.173 -0.020 0.109
year4 0.004 0.018 0.21 0.831 -0.031 0.039
year5 0.055 0.018 3.04 0.002 0.019 0.090 ***
year7 0.031 0.021 1.52 0.130 -0.009 0.072
year8 0.028 0.023 1.21 0.225 -0.017 0.073
year9 0.067 0.024 2.76 0.006 0.019 0.114 ***
year10 -0.023 0.030 -0.76 0.448 -0.081 0.036
year11 -0.035 0.031 -1.16 0.248 -0.095 0.025
industry1 -0.096 2.379 -0.04 0.968 -4.760 4.568
industry2 -1.574 1.544 -1.02 0.308 -4.600 1.452
industry3 -0.144 0.814 -0.18 0.859 -1.740 1.452
industry4 -0.538 0.843 -0.64 0.524 -2.190 1.115
industry5 -0.689 0.774 -0.89 0.373 -2.205 0.827
industry7 -1.025 0.675 -1.52 0.129 -2.348 0.297
industry9 0.225 0.234 0.96 0.336 -0.234 0.683
industry10 0.437 0.664 0.66 0.510 -0.864 1.738
industry11 -0.112 0.338 -0.33 0.739 -0.774 0.549
Constant 0.750 0.516 1.45 0.147 -0.262 1.762
Mean dependent var 0.954 SD dependent var 0.617
Number of obs 1638.000 Chi-square 5520.064
------------------------------------------------------------------------------
Instruments for first differences equation
Standard
D.(ARD ARDsq TANG CR SALES LEV GR)
GMM-type (missing=0, separate instruments for each period unless collapsed)
L2.L.ROA
Instruments for levels equation
Standard
ARD ARDsq TANG CR SALES LEV GR year1 year2 year3 year4 year5 year6 year7
year8 year9 year10 year11
_cons
GMM-type (missing=0, separate instruments for each period unless collapsed)
DL.L.ROA
------------------------------------------------------------------------------
Arellano-Bond test for AR(1) in first differences: z = -3.96 Pr > z = 0.000
Arellano-Bond test for AR(2) in first differences: z = 0.43 Pr > z = 0.668
------------------------------------------------------------------------------
Sargan test of overid. restrictions: chi2(13) = 31.50 Prob > chi2 = 0.003
(Not robust, but not weakened by many instruments.)
Hansen test of overid. restrictions: chi2(13) = 11.11 Prob > chi2 = 0.602
(Robust, but weakened by many instruments.)