<p>There isn't any single way of how to do it. A reasonable way is to calculate average profitability over these 5 periods, ordering firms from most to least profitable and then making the sub-sample from the top 20% or 25% or <span class="math-container">$x%$</span> depending on what you believe is reasonable.</p>

CC BY-SA 4.0
2023-01-09T17:41:37.963Z
This make senses somehow to me, I am wondering if is there any reference to it?
Phil Nguyen
CC BY-SA 4.0
2023-01-09T17:42:18.847Z
@PhilNguyen no reference, it is just a reasonable thing to do.
WilliamT
CC BY-SA 4.0
2023-01-09T17:40:39.667Z
2023-01-09T17:40:39.667Z
WilliamT
<p>I have panel data on firms in 3 countries (e.g., 100 firms in 3 countries in 5 years, and event happen at the 3rd year in all countries at the same time). For an example, for each firms I have 4 variables, including:</p>
<blockquote>
<p>y x1 x2 profitability</p>
</blockquote>
<p>(while y is dependent variable and the rest are independent variables). I am examining the impact of a law on y by using differences-in-differences. There is a theory that suggests that the law has more impact on firms' with high profitability.
Therefore, I want to test the impact of laws on a sample of firms with high profitability. However, each firms has 5 profiatbility (given my sample period is 5). So is there any conventional way or widely-used approach to getting a high-profitability subsample in such a case?</p>

<econometrics><regression>
What is the common way to separate panel sample by firms' profitability?
Phil Nguyen
# What is the common way to separate panel sample by firms' profitability?

(Asked by: username_0 on 2023-01-09)

I have panel data on firms in 3 countries (e.g., 100 firms in 3 countries in 5 years, and event happen at the 3rd year in all countries at the same time). For an example, for each firms I have 4 variables, including:

> y x1 x2 profitability

(while y is dependent variable and the rest are independent variables). I am examining the impact of a law on y by using differences-in-differences. There is a theory that suggests that the law has more impact on firms' with high profitability.
Therefore, I want to test the impact of laws on a sample of firms with high profitability. However, each firms has 5 profiatbility (given my sample period is 5). So is there any conventional way or widely-used approach to getting a high-profitability subsample in such a case?

**Tags:** econometrics, regression

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## 1 answers

### Answer by username_1 on 2023-01-09. Score: 1

There isn't any single way of how to do it. A reasonable way is to calculate average profitability over these 5 periods, ordering firms from most to least profitable and then making the sub-sample from the top 20% or 25% or $x%$ depending on what you believe is reasonable.

> **Comments:**
> **username_0**: This make senses somehow to me, I am wondering if is there any reference to it?  
> **username_1**: @PhilNguyen no reference, it is just a reasonable thing to do.  

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