A manager wanted to expand the operation of his firm. He was however wondering if the expansion will impact on their financial performance. The research department quickly sampled 750 firms and collected data on their financial performance measured with Return on Capital Employed (ROCE) in percentages, number of branches (X1), age of firm in year (X2), education of manager in years (X3), and number of employees (X4). The results were estimated in EVIEWS 10 using linear regression model. Study the results carefully and answer the questions that follow.
Dependent variable: Financial performance (Y)
|
Variables |
Coefficient |
Std. Error |
t-statistics |
p- value |
|
Number of branches |
0.54 |
0.63865 |
0.85 |
0.5674 |
|
Size of the firm |
0.86 |
0.08957 |
9.61 |
0.0000 |
|
Education of managers |
2.16 |
0.34657 |
6.24 |
0.0000 |
|
Number of employees |
3.13 |
0.29846 |
10.49 |
0.0000 |
|
Constant |
4.98 |
4.85789 |
1.06 |
0.9875 |
|
Number of observations |
300 |
|||
|
F-statistics |
40.9844 |
|||
|
Prob (F-statistics) |
0.0000 |
|||
|
R-squared |
0.8432 |
|||
|
Adj R-squared 0.8038 |
||||
Required:
- Write down the regression equation.
- Identify the significant and insignificant variables at 5% (0.05) significance level.
- Interpret the coefficients of the significant variables.
- Explain the value of R-square .
