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Thread: Control Variable as part of the Dependent Variable - Problem? Solutions?

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    Control Variable as part of the Dependent Variable - Problem? Solutions?




    Dear all,

    I'm currently trying to figure out the following problem: I have a dependent variable which is build as the standard deviation of six different variables. It consists several firm characteristica such as R&D investments, employees, international orientation. These indicators are also used as popular control variables in the strategy literature. Now I'm thinking about the fact whether it might cause any problems to include them as control variables. Or do you think it is not a big issue. If it would be, do I have to search for other possible control variables or to find a technical/methodological solution.

    The dependent variable is used in a panel-structure to measure changes over time when the CEO changes or not.

    I would very much appreciate your help with this problem! Thank you very much.

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    Re: Control Variable as part of the Dependent Variable - Problem? Solutions?

    Please provide more info. Many Stat models require indepence between independent and dependent variables.
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    Re: Control Variable as part of the Dependent Variable - Problem? Solutions?


    Sorry, for not answering, here is more information about the problem I try to solve.

    The question is, whether a change in the CEO position will lead to a change in the strategic behaviour of the company. I have a dataset of 127 companies between 2000 and 2011 and 210 ceo changes. CEO change is obviously a dummy variable with 0=no change, 1=change in the respective year. The strategic variable is measured as described above - the sum of the standard deviation of six single dimension in the respective year.

    I calculated a panel analysis with fixed effects using the following syntax in STATA: xtreg strat_t i.CEO_Change##i.country, fe
    No I would like to add some control variables to the analysis. I guess it is not possible to use employees or financial leverage as control variable as it is already included in the dependet variable. Might it be possible to use employees or financial leverage of the previous years?

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