Matching LBOs (Julia)

McNair Project

Matching LBOs (Julia)
Project Information
Project Title	Matching LBOs (Julia)
Owner	James Chen
Start Date
Deadline
Keywords	Tool
Primary Billing
Notes
Has project status	Active
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Leveraged Buyout Innovation (Academic Paper)

Instructions for running matching code

Inputs and Outputs

• Input: tab delimited file "E:/McNair/Projects/LBO/Clean/STATApredictLBOclean.txt"
  • This contains list of LBO and nonLBO firms from compustat 1970-2015, propensity scores, patent data, and other variables generated from stata code "statadatasetup4.do" and "statapredictLBOclean.do"

• Output: tab delimited file "E:/McNair/Projects/LBO/New matching/matchresults.txt"
  • This is the input file, except with an additional column "matchpair" indicating matched pairs:
  • Positive integers identify pairs matched, negative integers identify matched non-LBOs in years other than the match, -0.1 identifies LBOs that failed to match to any non-LBOs under constraints provided

Running Code

• Open Julia command line in administrator mode

• Change directory to E:\McNair\Projects\LBO\New matching\

• Run script LBOmatchscript.jl

Options

There are a few things that can be customized in the script. Getting this into a more user-friendly form is a WIP. In fact, some parts might be difficult, if not impossible, to write in a more accessible way.

Before running, modify the following options if necessary:

Modify if matching using different file

Line 12:

readtable("Filepath")

(Not implemented yet: More user-friendly way to input restrictions) Specify which observations are valid for matching. For now, we filter out all firms that were never granted a single patent in the period 1970-2015

• For firms that LBO, we also drop their observations in all other years from the list of candidates to match to other LBOs
• See inline comments in code for detailed description of what matchfilter2, matchfilter4, etc. represent

Lines 38-48

Specify propensity score type to use for matching

• Options are: logitp (panel logit), probitp (panel probit), or Cox proportional hazard (hr)
• Alternatively, can use the above, with regressions performed using winsorized values of regressors (trimmed at 1st and 99th percentiles): logitpw, probitpw, hrw

Line 58:

mscore = :logitpw;

Line 61:

randoption = 0;

• Specify whether matching priority should be deterministic or random. If deterministic, priority goes to lower GVKEY

Lines 69-81:

function mcexpr(i)
 #note that the below syntax is the simplest way to store a long string over multiple lines
 #(i.e., appending additional characters per line)
 #Also, note that order of operations forces us to put each condition in parentheses
 mcriteria = "nonLBOs[:matchsubset] = (nonLBOs[:industrygroup3].== LBOs[$i,:industrygroup3])"
 mcriteria = mcriteria * " .* (nonLBOs[:decade].==LBOs[$i,:decade])"
 mcriteria = mcriteria * " .* (nonLBOs[:patentstock] .>= (LBOs[$i,:patentstock]*.8))"
 mcriteria = mcriteria * " .* (nonLBOs[:patentstock] .<= (LBOs[$i,:patentstock]*1.2))"
 mcriteria = mcriteria * " .* (nonLBOs[:matchpair] .== 0 )"
 return eval(parse(mcriteria))
end

• Specify additional constraints on valid matches (modify code within function mcexpr as desired)
  • For example, default code forces matches to be within the same industry group, within the same decade, and with patent stocks within +/- 20% of LBO firm.