The model is,

Leverage= profitability + Firm Size + fixed effects+error

I am planning to include firm, industry and state(california, New York), country and year as fixed effects.

So my questions are two,

1, which or what else variable do you think is more appropriate to take as fixed effect variable in the model.

2, How can this fixed effects be measured to in quantitative terms( eg. Profit is measured as EBIT/Total Assets)

The sooner the answer the more I appreciate.

Thanks

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