Final Exam ECO321 – Estimate a regression of salary on firm sales and market value
Final Exam ECO321 Spring 2016.1. The Stata file ceosalary.dta contains data on the characteristics of 177 chief executive officers,which we will use to examine the effects of firm performance on CEO salary. The variables in thedataset include 1. salary (1990 compensation, $1000s), 2. age (in years), 3. college (=1 if attendedcollege), 4. grad (=1 if attended graduate school), 5. comten (years with company), 6. ceoten(years as ceo with company), 7. sales (1990 firm sales, millions), 8. prof its (1990 profits,millions), 9. mktval (market value, end 1990, millions).a. Estimate a regression of salary on firm sales and market value in constant elasticity (log-log)form. Interpret the effects of sales and market value on salaries of CEOsb. Add prof its and ceoten to the model. Which firm characteristics are significant determinantof salaries? Interpret the effect of an additional year of CEO tenure on salaries.c. Estimate a regression of log(salary) on log(sales), log(mktval), prof mar (prof its/sales),comten and ceoten. Interpret the effects of ceoten and comtend. Using an appropriate restricted regression, test the hypothesis that none of the 3 firmperformance variables matter for CEO salaries.e. Using an appropriate restricted regression, test the hypothesis that comten and ceoten have equaland opposite effects on log(salary).