Question: QUESTION 3 The following table was created using the data in CEOSAL2.RAW: Dependent Variable: log(salary) Regressors (1) (2) (3) log(sales) .224 B (.027) (040) 0.040)

QUESTION 3 The following table was created using the data in

QUESTION 3 The following table was created using the data in CEOSAL2.RAW: Dependent Variable: log(salary) Regressors (1) (2) (3) log(sales) .224 B (.027) (040) 0.040) log(mktval) B2 B2 0.050) 0.049) profmarg -.0022 (.0021) ceoten .0171 0.0055) comten -.0092 (.0033) intercept 4.94 4.62 4.57 (-20) (0.25) (0.25) Observations 177 177 177 R-squared .281 .304 .353 The variable salary is CEO salary of the firm, mktval is market value, profmarg is profit as a percentage of sales, ceoten is years as CEO with the current company, and comten is total years with the company. (a) (5 marks) Based on the results in column (1) evaluate the following the statement: "A 10% increase in sales is associated with about a 22.4% increase in CEO's salary". (b) (7 marks) Will the estimate @1 in column (2) be larger or smaller than the estimate .224 in column (1)? Explain. (c) (5 marks) Using column (3), comment on the effect of profmarg on CEO salary. (d) (6 marks) Interpret the coefficient on comten in column (3). State the null hypothesis that comten is not statistically significant. State the alternative that there is an effect of comten on log(salary). Then implement the test. (e) (5 marks) Explain how to compute the p-value for the test in (a). Draw a sketch to illustrate. (f) (5 marks) What do you make of the fact that longer tenure with the company, holding the other factors fixed, is associated with a lower salary? QUESTION 3 The following table was created using the data in CEOSAL2.RAW: Dependent Variable: log(salary) Regressors (1) (2) (3) log(sales) .224 B (.027) (040) 0.040) log(mktval) B2 B2 0.050) 0.049) profmarg -.0022 (.0021) ceoten .0171 0.0055) comten -.0092 (.0033) intercept 4.94 4.62 4.57 (-20) (0.25) (0.25) Observations 177 177 177 R-squared .281 .304 .353 The variable salary is CEO salary of the firm, mktval is market value, profmarg is profit as a percentage of sales, ceoten is years as CEO with the current company, and comten is total years with the company. (a) (5 marks) Based on the results in column (1) evaluate the following the statement: "A 10% increase in sales is associated with about a 22.4% increase in CEO's salary". (b) (7 marks) Will the estimate @1 in column (2) be larger or smaller than the estimate .224 in column (1)? Explain. (c) (5 marks) Using column (3), comment on the effect of profmarg on CEO salary. (d) (6 marks) Interpret the coefficient on comten in column (3). State the null hypothesis that comten is not statistically significant. State the alternative that there is an effect of comten on log(salary). Then implement the test. (e) (5 marks) Explain how to compute the p-value for the test in (a). Draw a sketch to illustrate. (f) (5 marks) What do you make of the fact that longer tenure with the company, holding the other factors fixed, is associated with a lower salary

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