Table 5

Preferred stock analysis

Panel A: Association of leverage components and idiosyncratic risk – First-difference OLS regression (1986–2016) with lagged levels and fixed effects for size deciles, book to market deciles, industry and year (N = 102,928) – Total preferred stock added
Dependent/Independent variableEquation (3a)Equation (3b)
ΔIRISKtΔIRISKt3ΔIRISKt5ΔIRISKtΔIRISKt3ΔIRISKt5
Δ(CL/CE)t0.2076*** (36.3738)0.1492*** (28.5524)0.1514*** (27.8067)   
Δ(NCL/CE)t0.1176*** (22.5868)0.0801*** (16.9040)0.0849*** (17.2361)   
Δ(TOL/CE)t   0.1815*** (25.9177)0.1327*** (22.4362)0.1372*** (21.9465)
Δ(TFL/CE)t   0.1220*** (18.2776)0.0831*** (14.5003)0.0866*** (14.2233)
Δ(PS/CE)t0.0229*** (4.9616)0.0246*** (5.7697)0.0207*** (4.7342)0.0219*** (4.7322)0.0241*** (5.6699)0.0200*** (4.6032)
Δ(STD_ROA)t0.0658*** (14.5345)0.0985*** (22.4221)0.0766*** (16.6382)0.0663*** (14.6396)0.0989*** (22.5055)0.0768*** (16.6890)
Δ(BID_ASK)t0.1807*** (31.4766)0.1712*** (34.0666)0.1822*** (35.0163)0.1826*** (31.7952)0.1730*** (34.5290)0.1839*** (35.3426)
Lagged level termsIncludedIncludedIncludedIncludedIncludedIncluded
Industry FEIncludedIncludedIncludedIncludedIncludedIncluded
Size Decile FEIncludedIncludedIncludedIncludedIncludedIncluded
BM Decile FEIncludedIncludedIncludedIncludedIncludedIncluded
Year FEIncludedIncludedIncludedIncludedIncludedIncluded
Coefficient F-tests
Δ(CL/CE)t = Δ(NCL/CE)t1317***832.2***798.3***   
Δ(CL/CE)t = Δ(PS/CE)t697.5***447.0***421.2***   
Δ(NCL/CE)t = Δ(PS/CE)t280.4***167.0***167.3***   
Δ(TOL/CE)t = Δ(TFL/CE)t   1279***813.3***795.5***
Δ(TOL/CE)t = Δ(PS/CE)t   358***278***262.2***
Δ(TFL/CE)t = Δ(PS/CE)t   185***126.6***116.9***
Maximum VIF1.741.741.741.931.931.93
Adjusted R20.2310.3070.3090.2310.3060.310
F-value184.4***185.5***169.7***184.4***186.9***171.1***
Note(s): For each independent variable, we report the standardized coefficient and the related t-statistic based on the standard error clustered by firm (Petersen, 2009). Coefficient F-tests compare the stated coefficients with the null hypothesis of equality (one-tailed significance of null rejection). ***, **, *significant at 0.01, 0.05 and 0.10, respectively. Δ signifies the difference in the level of the variable between period t and t−1. Lagged level terms (t−1) of independent variables (excluding dummy variables) are added to control for feedback effects and are not reported for brevity. For brevity, the intercept and the coefficients on industry dummies, firm size dummies, book to market dummies and year dummies are not reported. The maximum variance inflation factor excludes dummy variables and lagged terms.  Appendix 2 provides variable definitions
Panel B: Association of leverage components and idiosyncratic risk – First-difference OLS regression (1986-2016) with lagged levels and fixed effects for size deciles, book to market deciles, industry and year (N = 102,928) – preferred stock classes added
Dependent/Independent variableEquation (3c)Equation (3d)
ΔIRISKtΔIRISKt3ΔIRISKt5ΔIRISKtΔIRISKt3ΔIRISKt5
Δ(COLx/CE)t0.1689*** (25.2025)0.1206*** (20.5806)0.1261*** (21.2139)0.1687*** (25.2038)0.1206*** (20.6110)0.1259*** (21.2323)
Δ(IP/CE)t0.0021 (0.5461)0.0035 (0.9835)0.0033 (0.9547)0.0021 (0.5708)0.0036 (1.0372)0.0035 (1.0106)
Δ(DTX/CE)t0.0008 (0.2314)−0.0056* (−1.6721)−0.0019 (–0.5556)0.0009 (0.2605)−0.0054 (−1.6136)−0.0017 (−0.4872)
Δ(ONCL/CE)t0.0598*** (11.5758)0.0476*** (10.6478)0.0485*** (10.1328)0.0598*** (11.5920)0.0476*** (10.6871)0.0485*** (10.1627)
Δ(STD/CE)t0.0856*** (15.2564)0.0661*** (13.0112)0.0641*** (12.1684)0.0856*** (15.2480)0.0660*** (13.0180)0.0640*** (12.1762)
Δ(LTD/CE)t0.0605*** (10.2850)0.0367*** (6.8356)0.0383*** (6.9946)0.0605*** (10.2926)0.0371*** (6.9033)0.0386*** (7.0460)
Δ(CapL/CE)t0.0267*** (5.6388)0.0124*** (2.9178)0.0166*** (3.8437)0.0268*** (5.6510)0.0125*** (2.9471)0.0167*** (3.8662)
Δ(PSR/CE)t0.0102** (2.4199)0.0172*** (4.5712)0.0147*** (3.8751)   
Δ(PSNR/CE)t0.0148*** (3.2593)0.0148*** (3.4999)0.0112*** (2.6172)   
Δ(PSC/CE)t   0.0188*** (4.0976)0.0205*** (4.7843)0.0187*** (4.4828)
Δ(PSNC/CE)t   0.0057 (1.4783)0.0085** (2.5345)0.0055 (1.6361)
Δ(STD_ROA)t0.0642*** (14.2211)0.0969*** (22.1619)0.0750*** (16.3741)0.0642*** (14.2301)0.0970*** (22.2310)0.0750*** (16.4297)
Δ(BID_ASK)t0.1788*** (30.9855)0.1697*** (33.7069)0.1808*** (34.6139)0.1787*** (30.9954)0.1698*** (33.7609)0.1808*** (34.7088)
Lagged level termsIncludedIncludedIncludedIncludedIncludedIncluded
Industry FEIncludedIncludedIncludedIncludedIncludedIncluded
Size Decile FEIncludedIncludedIncludedIncludedIncludedIncluded
BM Decile FEIncludedIncludedIncludedIncludedIncludedIncluded
Year FEIncludedIncludedIncludedIncludedIncludedIncluded
Maximum VIF1.921.921.921.921.921.92
Adjusted R20.2320.3080.3110.2330.3080.312
F-value166.9***168.3***154.5***167.0***168.4***154.7***

Note(s): For each independent variable, we report the standardized coefficient and the related t-statistic based on the standard error clustered by firm (Petersen, 2009). ***, **, *significant at 0.01, 0.05 and 0.10, respectively. Δ signifies the difference in the level of the variable between period t and t−1. Lagged level terms (t−1) of independent variables (excluding dummy variables) are added to control for feedback effects and are not reported for brevity. For brevity, the intercept, and the coefficients on industry dummies, firm size dummies, book to market dummies and year dummies are not reported. The maximum variance inflation factor excludes dummy variables and lagged terms.  Appendix 2 provides variable definitions

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