FINANCIAL RESEARCH METHODS

Financial Research Methods

Financial Research Methods

Section A

Requirement 1 (For Correlation Table- See Appendix)

The correlation table is showing that the all the variables that include leverage, market to book value, case of liquidity, current asset to total assets and size except current liabilities to total asset of the firms are not significant. The reason of this statement is that the significance value of all the variables except current liabilities to total asset of the firms are greater than 0.05 which shows that there is no correlation between the variables. However, in the case of current liabilities to total asset of the firms, it can be observed that the variable is significant.

Requirement 2

In the case when all the variables are used as the independent variables in the same regression function then those variables which are highly correlated with other variables will have multicollinearity; on the other hand, the variables which are not correlated with the other variables will not have multicollinearity. Therefore, leverage, market to book value, case of liquidity, current asset to total assets will not multicollinearity; however, current liabilities to total asset may have multicollinearity with the other variables.

Requirement 3

Descriptive Statistics

Lev

PROFMARG

MTBV

Size

Liquidity

CF%S

CATAR

CLTAR

EBITDA

N

Valid

175

175

175

175

175

175

175

175

175

Missing

0

0

0

0

0

0

0

0

0

Mean

48.0026

11.0893

4.9730

13.8090

.9140

14.1209

.4378

.3411

4.3824E5

Median

56.1500

9.4300

2.1700

13.7800

.8000

11.2100

.4300

.3200

1.1504E5

Std. Deviation

1.49432E3

11.99810

16.85195

1.60687

.74561

12.22007

.23052

.15733

1.35338E6

Minimum

-1.25E4

-49.00

-16.47

9.92

.08

-13.98

.04

.05

-5.52E6

Maximum

10080.00

58.26

151.39

18.90

6.50

71.66

.99

.90

1.08E7

From the table of descriptive statistics, general information about the data of FTSE350 and S&P500 firms can be gathered as the mean, median, minimum, maximum and standard deviation of the all the variables are shown. This presents vital information about the FTSE350 and S&P500 firms as it can be observed that mean of leverage of the firms are high that is 48; however, the standard deviation of market to book value is high that is 16.8.

Requirement 4, 5, 6, 7, 8

Model Summary b

Model

R

R Square

Adjusted R Square

Std. Error of the Estimate

1

.323 a

.104

.072

11.55600

a. Predictors: (Constant), CLTAR, Size, Lev, Liquidity, MTBV, CATAR

b. Dependent Variable: PROFMARG

ANOVA b

Model

Sum of Squares

df

Mean Square

F

Sig.

1

Regression

2613.153

6

435.526

3.261

.005 a

Residual

22434.914

168

133.541

Total

25048.067

174

a. Predictors: (Constant), CLTAR, Size, Lev, Liquidity, MTBV, CATAR

b. Dependent Variable: PROFMARG

In the regression, the analysis of variance table is showing that the significance value is 0.005 which reflects that the model is significant and we can further explain the regression function.

Moreover, the table of model summary in the regression function is showing the relationship of dependent variable that is operating profit margin with the firm size, leverage, liquidity, market to book value, firm's current asset to total assets and current liabilities to total asset as it can be observed that there is 32.3 % relationship of operating profit margin with all the independent variables.

Coefficients a

Model

Unstandardized Coefficients

Standardized Coefficients

t

Sig.

Collinearity Statistics

B

Std. Error

Beta

Tolerance

VIF

1

(Constant)

9.734

8.029

1.212

.227

Lev

.001

.001

.074

.985

.326

.949

1.053

MTBV

-.006

.054

-.009

-.116

.908

.941

1.063

Size

.351

.548

.047

.641

.522

.990

1.010

Liquidity

1.737

1.349

.108

1.287

.200

.758

1.319

CATAR

4.941

5.081

.095

.972

.332

.560

1.787

CLTAR

-21.242

7.604

-.279

-2.794

.006

.536

1.865

a. Dependent Variable: PROFMARG

The coefficients table is showing the significance value of individual variables with the beta values, tolerance and variance inflation factor which presents the multicollinearity. It can be observed that all the independent variables are not significant except current liabilities to total asset as the significance value is less than 0.05; however, there is negative relationship between the operating profit margin and current liabilities to total asset which can be observed through the beta values.

Model Summary b

Model

R

R Square

Adjusted R Square

Std. Error of the ...