Question

A. Identify the independent variable(s) – if any (and define them precisely and indicate whether they are qualitative or quantitative)

B. Identify the dependent variable – if any (and define them precisely and indicate whether they are qualitative or quantitative)

C. Identify they type of analysis that is appropriate (Chi-Square test of independence, ANOVA, Regression, or Correlation)

D. Justify why the analysis you identified in part C is correct.

Some critics of big business argue that CEOs are overpaid and that their compensation is not related to the performance of their company. To test this theory, data on executive’s total pay and company’s performance was collected from a randomly set of fifty companies.

Thank you.

Answer 1

A. The independent variable is Executive's total pay and it is quantitative.

B. The dependent variable is the company's performance and it is also quantitative because a company's performance is measured by its profit or loss.

C. The regression is the most appropriate type of analysis to test the theory that CEOs are overpaid and their compensation is not related to the performance of their company.

D. The regression analysis is most appropriate because we want to measure the relationship between the executive's total pay and the company's performance numerically which can be done with the help of regression modeling.