The following model is used to explain whether a firm is tak

The following model is used to explain whether a firm is taken over by another firm during a year:

P(TAKEOVER=1|X)= f(b0avgprofit+b1marketvalue+b2debt+b3ceosalary+b4ceoage)

State the Null hypothesis that, other factors being equal, variables related to CEO have no effect on the probability of takeover. How many df are in the Chi-square distribution for the LR or the Wald test?

Solution

The following model is used to explain whether a firm is taken over by another firm during a year: P(TAKEOVER=1|X)= f(b0avgprofit+b1marketvalue+b2debt+b3ceosala

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