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?