Dependent, independent and controlled variables
| Variable | Application | Type of variable | Calculation | Explanation |
|---|---|---|---|---|
| ESG rating | H1 and H2 | Independent variable | Quantified as explained in Table 4 | Environment, social and governance (ESG) |
| ROCE | H1 | Dependent variable | ROCE = EBIT/ (current assets − current liabilities) | Return-on-capital-employed (ROCE) Earnings before interest and tax (EBIT) |
| Tobin’s Q | H2 | Dependent variable | Tobin’s Q = (equity market value + liabilities’ market value)/(equity book value + liabilities’ market value) | Equity market value is calculated by multiplying the number of shares outstanding at the end of the fiscal year by the share price at the end of the fiscal year; The book value of assets is used as a proxy for the replacement costs of assets |
| DOT | H1 and H2 | Controlled variable | DOT = total liabilities/shareholder’s equity | Debt-to-equity ratio (DOT) |
| Size | H1 and H2 | Controlled variable | Size = log (total assets) | Total assets as a proxy for company size |
| Variable | Application | Type of variable | Calculation | Explanation |
|---|---|---|---|---|
| Independent variable | Quantified as explained in | Environment, social and governance (ESG) | ||
| Dependent variable | ROCE = EBIT/ (current assets − current liabilities) | Return-on-capital-employed (ROCE) | ||
| Dependent variable | Tobin’s Q = (equity market value + liabilities’ market value)/(equity book value + liabilities’ market value) | Equity market value is calculated by multiplying the number of shares outstanding at the end of the fiscal year by the share price at the end of the fiscal year; The book value of assets is used as a proxy for the replacement costs of assets | ||
| Controlled variable | DOT = total liabilities/shareholder’s equity | Debt-to-equity ratio (DOT) | ||
| Controlled variable | Size = log (total assets) | Total assets as a proxy for company size |