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In order to build your estimation model, your team has searched and learnt from previous studies and found the results from a study which examines dividend pay-out ratios for firms. The study estimated the following econometric model (using simulation data): +1 h +4 <=0 Variable descriptions: Payout Profitability Cash Growth MTBV D/E Total liabilities/shareholders' equity Tax Corporate tax/ net profit before tax Model (1) was estimated by using Ordinary Least Squares (OLS) method. Intercept Profitability +1 Cash Growth MTBV D/E Tax Obs R² Yearly dividends divided by net income after tax Earnings before interest and taxes/Total assets Log of cash flow from operating activities Sale growth (current sales - previous sales)/ previous sales Market to book value=share price beginning of the year/net asset value per share basic Coefficients Standard Error 0.046 0.191 0.0373 -0.0683 -0.0214 -0.0099 -0.033 265 0.552 0.0154 0.0683 0.0065 0.0187 0.0027 +5/ 0.002 0.0168 P-value + (1) 0.0031 0.0056 2.67E-08 0.0003 6.83E-14 1.34E-06 0.0506 Part 2a. Checking the assumptions of OLS estimates Before interpreting the results above, you need to check the assumption of OLS estimates by answering the following questions: 1. Discuss which assumptions of Multiple Linear Regression (MLR) need to be satisfied in order to get best unbiased coefficient estimates from OLS estimator for Model (1)? Discuss in detail each assumption the context of Model (1). 2. Describe whether the assumption of MLR 4 is likely to hold or not in Model (1)? Briefly explain. 3. Describe whether the assumption of MLR 5 is likely to hold or not in Model (1)? Briefly explain. Part 2b. Interpreting the estimated results in Model 1 1. Explain the Goodness-of-Fit 2. Explain the meaning of the coefficients on the explanatory variables that are significant ( choose the best significant level among 1%, 5% and 10% for each variable). 3. Based on relevant economic theories, do the results in of Model 1 support what you expect for the estimated slope coefficients? PART 3: FURTHER DISCUSSION One of team members in the research team suggests adding more variables that are relevant for Vietnamese context. Providing your suggestion by adding at least one relevant factor which affects dividend pay-out ratios for listed firms in Vietnam in Model (1). How would you expect this to impact the Goodness of Fit of the model. In order to build your estimation model, your team has searched and learnt from previous studies and found the results from a study which examines dividend pay-out ratios for firms. The study estimated the following econometric model (using simulation data): +1 h +4 <=0 Variable descriptions: Payout Profitability Cash Growth MTBV D/E Total liabilities/shareholders' equity Tax Corporate tax/ net profit before tax Model (1) was estimated by using Ordinary Least Squares (OLS) method. Intercept Profitability +1 Cash Growth MTBV D/E Tax Obs R² Yearly dividends divided by net income after tax Earnings before interest and taxes/Total assets Log of cash flow from operating activities Sale growth (current sales - previous sales)/ previous sales Market to book value=share price beginning of the year/net asset value per share basic Coefficients Standard Error 0.046 0.191 0.0373 -0.0683 -0.0214 -0.0099 -0.033 265 0.552 0.0154 0.0683 0.0065 0.0187 0.0027 +5/ 0.002 0.0168 P-value + (1) 0.0031 0.0056 2.67E-08 0.0003 6.83E-14 1.34E-06 0.0506 Part 2a. Checking the assumptions of OLS estimates Before interpreting the results above, you need to check the assumption of OLS estimates by answering the following questions: 1. Discuss which assumptions of Multiple Linear Regression (MLR) need to be satisfied in order to get best unbiased coefficient estimates from OLS estimator for Model (1)? Discuss in detail each assumption the context of Model (1). 2. Describe whether the assumption of MLR 4 is likely to hold or not in Model (1)? Briefly explain. 3. Describe whether the assumption of MLR 5 is likely to hold or not in Model (1)? Briefly explain. Part 2b. Interpreting the estimated results in Model 1 1. Explain the Goodness-of-Fit 2. Explain the meaning of the coefficients on the explanatory variables that are significant ( choose the best significant level among 1%, 5% and 10% for each variable). 3. Based on relevant economic theories, do the results in of Model 1 support what you expect for the estimated slope coefficients? PART 3: FURTHER DISCUSSION One of team members in the research team suggests adding more variables that are relevant for Vietnamese context. Providing your suggestion by adding at least one relevant factor which affects dividend pay-out ratios for listed firms in Vietnam in Model (1). How would you expect this to impact the Goodness of Fit of the model.
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Accounting Principles
ISBN: 978-1119048473
7th Canadian Edition Volume 2
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
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