Import the four data flics into SAS format. Remember these are comma-separated value files, and you will have to specify the delimiter correctly.

INSTRUCTIONS TO CANDIDATES

ANSWER ALL QUESTIONS

PART I: PREPARING THE DATASET (50 POINTS).

Step 1: (2 point

Import the four data flics into SAS format. Remember these are comma-separated value files, and you will have to specify the delimiter correctly.

Step 2: (5 points)

I)cfinc the following variables required for your analysis. 11w help file viili all the variable definitions arc provided in the excel tile Variable Definitions.xlsx. In the tab named “Variables You Need to Define”, you will find a list of variables that you will need to create. Using the compustat file that you have created in the previous step, create the new variables. I have already given you the definitions of the variables as well as the names of the new variables to be created.

Please follow these instructions carefully.

Step 3: (10 points)

Calculation of Whited Wu Financial Constraints Index  Luis step requires several lines of code. we needs to create an industry-level variable. The first thing you need to do is create a 3-digit industry or SIC variable. Start b’ using the 4-digit industry variable sI(:) and create a 3-digit industry variable from this. (I lint: I low will you do this? One simple way to achieve this is to divide the SIC variable by lo and use the quotient as the 3-digit SIC variable)the next step is to compute the industry level sales variable, by summing the annual sales figures

of all the firms belonging to the 3-digti SIC industry. (I lint: You can do proc means to add the

individual sales for each firm to create industry level sales variable) Thu next step is to create industry level sa/es gm wib rariable (içt). The construction is exactl same as the firm level sales growth variable which ou defined in the previous step, Finally, define the Financial Friction (FFW\V as follows

Hw’lr= -0.91 xŒ4T_0.062X 1)IVPAYIiR + O.021x TLTI)—O.044 xSJZI + O.!02x ISG—O.035xSG

All the variable definitions are provided in the last two steps.

Step 4: (20 points)

Calculation of Serfiing (2013) Operating Leverage Again, this step combines several data/proc steps in SAS. To do this, we will follow Scrfling (2013).look at the regression equation (I) on page 10 in the Scrfling paper.

Attachments:

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