Matching LBOs (Julia)

Leveraged Buyout Innovation (Academic Paper)

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
Copyright © 2016 edegan.com. All Rights Reserved.

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:

Specify input file (if using different file than default)

Line 12:

df = readtable("E:/McNair/Projects/LBO/Clean/STATApredictLBOclean.txt", separator = '\t');

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.