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An empirical project on –Does firm size matter for innovation?

You are required to write an individual 3,000-word report demonstrating your ability to use quantitative methods
to undertake an empirical analysis on a topic in corporate finance.
Below each section title, examples of what might be included are listed. You are expected to follow this
structure, but small variations are allowed.
Section I: Introduction
• Briefly describe the purpose of the study by specifying your research question and focus, and how you intend
to conduct it.
• Try to convince the reader why your work is interesting/worth doing and your research findings are important
and relevant.
• Relate your work to some existing study and describe how it fits into the existing literature.
• Outline the structure of the paper.
Section II: The Conceptual framework
• Discuss in detail the theories or rationales that underlie the relationship you wish to study.
• Review some of the relevant literature (theoretical and empirical).
• Describe your prediction of the relationship that you are studying and specify testable hypotheses.
Section III: The Data and methodology
• Describe the source(s) of the data and how each variable is measured.
• Provide an exploratory data analysis. Point out any salient features of the data and describe any interesting
pattern/ correlation in the data. Provide summary statistics and discuss your findings.
• Specify the regression model, and discuss why such a specification is adopted, for example, why each of the
explanatory variables is included, and describe their anticipated effect (either based on theory, previous
empirical work, or your rationale). A formal presentation of an empirical model with full explanation of your
notation is expected.
• Discuss the estimation strategy you adopt, the potential econometric issues that may be relevant and how you
plan to deal with them. Also discuss any estimator, tests and approaches you intend to apply to support your
arguments in your analysis.
Section IV: Econometric results
• Properly present the econometric estimates and evaluate the model performance in terms of goodness of fit and
diagnostic tests.
• Interpret the estimated coefficients, and describe whether they correspond to your expectations in light of the
literature/theories
• Discuss the results of other specification tests, hypothesis tests, robustness analysis (if you have conducted
any) and report your findings.
• Does the estimated equation support the theory on which it is based or the rationale in your mind? What
explains any discrepancy between theory and empirics?
• How do the results compare with existing findings? What new insights your results have added?
• You should put your results in a table; here you should follow the approach used in peer reviewed research
papers.
Section V: Conclusion
• Summarize your study.
• Discuss the implications and/or caveats of the results.
• Suggest how the study may be improved and/or extended in future work.
Format, Presentation and Style
• Provide full list of references
• Provide Appendices (diagrams, plots, tables, and regression outputs) that are considered to be useful for the
reader.
• You are required to attach a print screen of all the results as an appendix.
The data has been extracted from the DataStream database and all the variables are the latest available for you to
use
Debt ratio=Total debt/Total Asset
Firm age=Age of the firm
Size =Ln (Total assets)
Innovation=R&D investment/Total assets
Sales Growth=Percentage growth in sales
Profitability=EBIT/sales

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