Hi,
Can someone explain exactly what this equation is expressing:
πππ(π π)=π½1βπΉππππππ+π½2βπππ₯ππ+π½3βπΆπ+πΌπΌ+πΌπΆ+πΌπ+π,
where RM is return multiples, B1 is a dummy if the investor is foreign/local , B2 is a dummy if the investor is mixed (mix of foreign and local), B3 is the vector of control variables (CV) refers to the deal control variables holding period, transaction amount at exit, exit type, and minority/majority investment and the rest is control for the target industry (πΌπΌ) the target country (πΌπΆ), and the exit year (πΌπ) to mitigate potential endogeneity concerns.
I understand that the model is trying to explain the return multiples of a set of investments depending if the investor is foreign, local or mixed.
What i don't understand is the remaining part. I assume the control vector ensures that only transactions with e.g. the same holding period are compared. But what does the remaining part (control for the target industry, country and exit year) mean and why are they not just included in the control vector?
Hope that someone can clarify this
Best regards
Dennis
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