Question

An ingenious regression analysis was reported in which the effects of the 1985 French banking deregulation were assessed. Bank equity was the dependent variable, and each data point was a tax return for a particular quarter and bank in France from 1978 to the time the research was done. This resulted in 325,928 data points, assumed a random sample. The independent variables were Bankdep-average debt in the industry during this period; ROA-the given firm's average return on assets for the entire period, and After-0 before 1985, and 1 after 1985. The variables used in this regression were all cross-products. These variables and their coefficient estimates (with their standard errors) are given below.
After * Bankdep ....... -0.398 (0.035)
After * Bankdep * ROA .... 0.155 (0.057)
After * ROA ∑ ....... -0.072 (0.024)
Bankdep * ROA ...... -0.286 (0.073)
The adjusted R2 was 53%. Carefully analyze these results and try to draw a conclusion about the effects of the 1985 French Banking Deregulation Act.


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  • CreatedJune 03, 2015
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