I have data of 182 Firms for a period of(2017-2019). I want to know the financial performance of SMEs with reference to Conventional & Islamic Finance.
I have three categories, i.e.
1. Firms with financing from Islamic Finance
2. Firms with financing from Conventional Finance
3. Firms with financing Own-manger own sources/loans and not any bank financing
4. Firms with financing from Conventional + Islamic Finance
ROA, ROE as uses as a measures of financial performance Whereas, Short term debt, Long term debt and Debt to equity uses for Capital Structure.
The following paper may help you in this regard:
Estimating dynamic panel models in corporate finance
MJ Flannery, KW Hankins - Journal of Corporate Finance, 2013 - Elsevier
Please follow the flowchart given below...I think it will help you
You may use GMM or fixed or random effects, you may use stata for this.
If the financing variable changes over time, a good option is to employ fixed-effects with robust standard errors clustered at the firm level. If there is little variation over time of the variables of interest you can resort to RE models.
You may need to do some preliminary tests i.e., Normality test, heteroscedasticity test, endogeneity test, hausman test for your dataset. Then you may decide which model fits best for your data. 2sls, 3sls, FE, RE, GMM, GLS, PCSE are some examples of panel regressions used in STATA. Thanks
You may use a static model or dynamic model. Please read on the assumptions for each of these models and compare them with your data. It will help you decide on which technique to use
In my opinion, you should use the GMM dynamic panel data models which are more suitable for ‘small T, large N’ panels: few time periods and many individual units. Please see this document, it could be helpful
http://fmwww.bc.edu/EC-C/S2013/823/EC823.S2013.nn05.slides.pdf
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