Overinvestment estimation
| Variables | Denote | Definition |
|---|---|---|
| Dependent variables | ||
| New investment | Total investment including long-term and short-term investment divided by total asset | |
| Explanatory variables | ||
| Cash flow | The cash available in a company after subtracting capital expenditures | |
| Market performance | Growth option is Tobin's Q ratio calculated as the market value of a company divided by the firm's assets | |
| Asset turnover | The ability to generate fixed assets through sales measured by total fixed assets divided by total sales | |
| Firm growth | The growth rate of firm sales over year | |
| Firm size | Natural logarithm of total assets | |
| Business risk | Standard deviation of EBITDA (earnings before interest, taxes, depreciation and amortization) over total asset ratio in three consecutive years | |
| Leverage | Total liabilities over total assets | |
| Variables | Denote | Definition |
|---|---|---|
| New investment | Total investment including long-term and short-term investment divided by total asset | |
| Cash flow | The cash available in a company after subtracting capital expenditures | |
| Market performance | Growth option is Tobin's Q ratio calculated as the market value of a company divided by the firm's assets | |
| Asset turnover | The ability to generate fixed assets through sales measured by total fixed assets divided by total sales | |
| Firm growth | The growth rate of firm sales over year | |
| Firm size | Natural logarithm of total assets | |
| Business risk | Standard deviation of EBITDA (earnings before interest, taxes, depreciation and amortization) over total asset ratio in three consecutive years | |
| Leverage | Total liabilities over total assets | |
Note(s): All the above variables are calculated by using financial data from Thomson Reuters Eikon Financial Analysis
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