Saturday, March 26, 2022

Estimating the modified Jones model by industry and year using panel data

Hi all. I'm studying the relationship between restatements and firms' earnings management behaviour. I'm using DA to capture such behaviour. The sample period is 2010-2019. Let's say a firm restated in 2015, I'm interested in its DA in period 13, 14, 16, 17 (two years before and two years after). Data in t-3 (2012 in this case) and t (2015) is also included as this is a panel data. I have all the data transformed into the delta form, it is just the last step that I can never get right. I attached a file in which all the data are processed and are ready for the last step.

below is the code I first used:

​​​​​​
Code:
gen Jones=.
forval y = 2010 (1) 2019{
forval i = 1 (1) 136{
display `i'
display `y'
reg scaled_TACC inverse_lagTA term2 scaled_PPE if `i' == Industryid&`y'== YEAR, noconstant
predict r if `i'== Industryid&`y'== YEAR, resid
replace Jones=r if `i'== Industryid&`y'== YEAR
drop r
}
}
But this gives me nothing and STATA keeps showing r451. Then I reformed it and added a line:

Code:
​​​​​​ gen Jones=.
forval y = 2010(1)2019{
   forval i = 1(1) 136{
      display `i'
      display `y'
      capture noisily{
         reg scaled_TACC inverse_lagTA term2 scaled_PPE if `i'== Industryid & `y'== YEAR, noconstant
         predict r if `i'== Industryid & `y'== YEAR, resid
         replace Jones_2005_TAC2=r if `i'== Industryid & `y'== YEAR 
         drop r
      }
   }
}
Then the code starts running but, still, I have quite a lot of missing values in my result. Really hope someone could help me. Thanks in advance!!

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