Summary of dependent, independent and controlling variables
| Variable | Formulas | Authors |
|---|---|---|
| Dependent variables | ||
| Return on asset | Net income after tax/average total assets * 100 | Rehman (2013), Lestari (2021) |
| Return on equity | Net income after tax/average total equity * 100 | Maina et al. (2018) |
| Earnings per share | Net income after tax/average total outstanding share | Kenn-Ndubuisi and Nweke (2019) |
| Tobin’s Q | Total market value of firm/Total asset of firm | Dey et al. (2018) |
| Independent variables | ||
| Equity multiplier | Total assets/total shareholder equity | Abraham et al. (2017), Okunev (2022) |
| Interest coverage | EBIT/interest expense | Vishwanath (2007), Graham and Harvey (2001) |
| Fixed charge coverage ratio | (EBIT + fixed charges before tax)/(fixed charges before tax + interest) | Graham and Harvey (2001), Brealey et al. (2018) |
| Degree of financial leverage | % changes in net income/% changes in EBIT | Vernimmen et al. (2022), Brealey et al. (2018) |
| Debt to EBITDA | Total debt/EBITDA | Strischek (2001), Ross et al. (2008) |
| Capitalization ratio | Total debt/(total debt + shareholder equity) | Blouin et al. (2014), Brealey et al. (2018) |
| Controlling variables | ||
| Age | The number of years the companies have been on the stock market | Mamaro and Legotlo (2021) |
| Sales growth | (Current year sales – previous year sales)/previous year sales * 100 | Dey et al. (2018), Afolabi et al. (2019) |
| Size of the firm | Natural log of total asset of the manufacturing companies | Mamaro and Legotlo (2021), Kalash and Bilen (2021) |
| Variable | Formulas | Authors |
|---|---|---|
| Return on asset | Net income after tax/average total assets * 100 | |
| Return on equity | Net income after tax/average total equity * 100 | |
| Earnings per share | Net income after tax/average total outstanding share | |
| Tobin’s Q | Total market value of firm/Total asset of firm | |
| Equity multiplier | Total assets/total shareholder equity | |
| Interest coverage | EBIT/interest expense | |
| Fixed charge coverage ratio | (EBIT + fixed charges before tax)/(fixed charges before tax + interest) | |
| Degree of financial leverage | % changes in net income/% changes in EBIT | |
| Debt to EBITDA | Total debt/EBITDA | |
| Capitalization ratio | Total debt/(total debt + shareholder equity) | |
| Age | The number of years the companies have been on the stock market | |
| Sales growth | (Current year sales – previous year sales)/previous year sales * 100 | |
| Size of the firm | Natural log of total asset of the manufacturing companies | |
Source(s): Authors’ own work
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