Table 8 Cross-cultural asset growth...

Table 8

Cross-cultural asset growth premia conditional on debt ratios

	Equally-weighted returns			Value-weighted returns
	AG1	AG10	AG1-AG10	AG1	AG10	AG1-AG10
Panel A: Portfolios sorted by debt ratio
Low	1.188***	0.749*	0.439***	0.841**	0.575	0.267*
Low	(3.54)	(1.94)	(3.24)	(2.49)	(1.45)	(1.67)
Median	1.224***	0.768**	0.456***	1.155***	0.815**	0.340**
Median	(3.46)	(2.06)	(3.37)	(3.25)	(2.12)	(2.21)
High	0.863**	0.625*	0.238	0.765**	0.663*	0.102
High	(2.41)	(1.67)	(1.65)	(2.09)	(1.68)	(0.60)
Panel B: Portfolios sorted by debt ratio and IDV
Low debt ratio
Low IDV	1.092***	1.177***	−0.085	0.571	0.938**	−0.368
Low IDV	(3.18)	(2.76)	(−0.44)	(1.61)	(2.12)	(−1.65)
Median IDV	1.328***	0.778*	0.550**	1.202***	0.597	0.606**
Median IDV	(3.46)	(1.88)	(2.49)	(2.98)	(1.42)	(2.25)
High IDV	1.124***	0.291	0.833***	0.712*	0.192	0.520**
High IDV	(2.81)	(0.67)	(4.14)	(1.79)	(0.43)	(2.23)
High-Low	0.032	−0.886**	0.918***	0.141	−0.747**	0.888***
High-Low	(0.11)	(−2.52)	(3.62)	(0.42)	(−2.01)	(2.96)
Median debt ratio
Low IDV	1.483***	1.151***	0.331	1.207***	1.002**	0.204
Low IDV	(3.41)	(2.62)	(1.64)	(2.70)	(2.17)	(0.92)
Median IDV	1.220***	0.805*	0.415*	1.232***	0.842*	0.389
Median IDV	(2.91)	(1.91)	(1.68)	(2.92)	(1.94)	(1.41)
High IDV	0.978***	0.362	0.616***	1.023***	0.617	0.407**
High IDV	(2.76)	(0.96)	(3.97)	(2.86)	(1.59)	(2.30)
High-Low	−0.505	−0.790**	0.285	−0.184	−0.386	0.202
High-Low	(−1.40)	(−2.44)	(1.13)	(−0.49)	(−1.15)	(0.77)
High debt ratio
Low IDV	0.962**	1.033**	−0.071	0.833*	0.988**	−0.155
Low IDV	(2.10)	(2.29)	(−0.30)	(1.72)	(2.12)	(−0.58)
Median IDV	0.811**	0.670	0.141	0.758*	0.579	0.179
Median IDV	(2.10)	(1.50)	(0.52)	(1.76)	(1.19)	(0.56)
High IDV	0.794**	0.166	0.628***	0.673**	0.430	0.244
High IDV	(2.12)	(0.45)	(4.07)	(1.99)	(1.16)	(1.33)
High-Low	−0.168	−0.867**	0.699**	−0.159	−0.558	0.399
High-Low	(−0.45)	(−2.49)	(2.53)	(−0.41)	(−1.64)	(1.24)
Panel C: Portfolios sorted by debt ratio and UAI
Low debt ratio
Low UAI	1.377***	0.754*	0.623***	0.931**	0.345	0.586***
Low UAI	(3.49)	(1.75)	(3.45)	(2.44)	(0.81)	(2.83)
Median UAI	1.037***	0.539	0.499**	0.633*	0.430	0.203
Median UAI	(2.96)	(1.23)	(2.30)	(1.71)	(0.95)	(0.79)
High UAI	1.180***	0.935**	0.245	0.985***	0.942**	0.043
High UAI	(3.27)	(2.52)	(1.01)	(2.64)	(2.38)	(0.17)
High-Low	−0.197	0.181	−0.378	0.054	0.597**	−0.543*
High-Low	(−0.77)	(0.66)	(−1.39)	(0.20)	(2.12)	(−1.83)
Median debt ratio
Low UAI	1.452***	0.725*	0.727***	1.318***	0.759*	0.560**
Low UAI	(3.56)	(1.74)	(4.22)	(3.23)	(1.72)	(2.55)
Median UAI	1.147***	0.426	0.721***	1.010***	0.488	0.521**
Median UAI	(2.93)	(1.05)	(3.24)	(2.61)	(1.24)	(2.13)
High UAI	1.083***	1.170***	−0.087	1.140***	1.212***	−0.073
High UAI	(3.09)	(3.11)	(−0.40)	(3.02)	(2.93)	(−0.29)
High-Low	−0.369	0.445*	−0.814***	−0.179	0.454	−0.632**
High-Low	(−1.35)	(1.76)	(−3.32)	(−0.60)	(1.49)	(−2.02)
High debt ratio
Low UAI	1.011**	0.762*	0.249	0.970**	0.793*	0.178
Low UAI	(2.36)	(1.82)	(1.20)	(2.26)	(1.85)	(0.80)
Median UAI	0.872**	0.390	0.482**	0.689*	0.416	0.273
Median UAI	(2.35)	(0.99)	(2.44)	(1.79)	(1.01)	(1.08)
High UAI	0.732**	0.705*	0.028	0.656	0.756*	−0.100
High UAI	(2.01)	(1.73)	(0.11)	(1.63)	(1.70)	(−0.35)
High-Low	−0.279	−0.058	−0.222	−0.315	−0.037	−0.278
High-Low	(−1.02)	(−0.19)	(−0.71)	(−1.04)	(−0.12)	(−0.87)

	Equally-weighted returns			Value-weighted returns
	AG1	AG10	AG1-AG10	AG1	AG10	AG1-AG10
Panel A: Portfolios sorted by debt ratio
Low	1.188***	0.749*	0.439***	0.841**	0.575	0.267*
Low	(3.54)	(1.94)	(3.24)	(2.49)	(1.45)	(1.67)
Median	1.224***	0.768**	0.456***	1.155***	0.815**	0.340**
Median	(3.46)	(2.06)	(3.37)	(3.25)	(2.12)	(2.21)
High	0.863**	0.625*	0.238	0.765**	0.663*	0.102
High	(2.41)	(1.67)	(1.65)	(2.09)	(1.68)	(0.60)
Panel B: Portfolios sorted by debt ratio and IDV
Low debt ratio
Low IDV	1.092***	1.177***	−0.085	0.571	0.938**	−0.368
Low IDV	(3.18)	(2.76)	(−0.44)	(1.61)	(2.12)	(−1.65)
Median IDV	1.328***	0.778*	0.550**	1.202***	0.597	0.606**
Median IDV	(3.46)	(1.88)	(2.49)	(2.98)	(1.42)	(2.25)
High IDV	1.124***	0.291	0.833***	0.712*	0.192	0.520**
High IDV	(2.81)	(0.67)	(4.14)	(1.79)	(0.43)	(2.23)
High-Low	0.032	−0.886**	0.918***	0.141	−0.747**	0.888***
High-Low	(0.11)	(−2.52)	(3.62)	(0.42)	(−2.01)	(2.96)
Median debt ratio
Low IDV	1.483***	1.151***	0.331	1.207***	1.002**	0.204
Low IDV	(3.41)	(2.62)	(1.64)	(2.70)	(2.17)	(0.92)
Median IDV	1.220***	0.805*	0.415*	1.232***	0.842*	0.389
Median IDV	(2.91)	(1.91)	(1.68)	(2.92)	(1.94)	(1.41)
High IDV	0.978***	0.362	0.616***	1.023***	0.617	0.407**
High IDV	(2.76)	(0.96)	(3.97)	(2.86)	(1.59)	(2.30)
High-Low	−0.505	−0.790**	0.285	−0.184	−0.386	0.202
High-Low	(−1.40)	(−2.44)	(1.13)	(−0.49)	(−1.15)	(0.77)
High debt ratio
Low IDV	0.962**	1.033**	−0.071	0.833*	0.988**	−0.155
Low IDV	(2.10)	(2.29)	(−0.30)	(1.72)	(2.12)	(−0.58)
Median IDV	0.811**	0.670	0.141	0.758*	0.579	0.179
Median IDV	(2.10)	(1.50)	(0.52)	(1.76)	(1.19)	(0.56)
High IDV	0.794**	0.166	0.628***	0.673**	0.430	0.244
High IDV	(2.12)	(0.45)	(4.07)	(1.99)	(1.16)	(1.33)
High-Low	−0.168	−0.867**	0.699**	−0.159	−0.558	0.399
High-Low	(−0.45)	(−2.49)	(2.53)	(−0.41)	(−1.64)	(1.24)
Panel C: Portfolios sorted by debt ratio and UAI
Low debt ratio
Low UAI	1.377***	0.754*	0.623***	0.931**	0.345	0.586***
Low UAI	(3.49)	(1.75)	(3.45)	(2.44)	(0.81)	(2.83)
Median UAI	1.037***	0.539	0.499**	0.633*	0.430	0.203
Median UAI	(2.96)	(1.23)	(2.30)	(1.71)	(0.95)	(0.79)
High UAI	1.180***	0.935**	0.245	0.985***	0.942**	0.043
High UAI	(3.27)	(2.52)	(1.01)	(2.64)	(2.38)	(0.17)
High-Low	−0.197	0.181	−0.378	0.054	0.597**	−0.543*
High-Low	(−0.77)	(0.66)	(−1.39)	(0.20)	(2.12)	(−1.83)
Median debt ratio
Low UAI	1.452***	0.725*	0.727***	1.318***	0.759*	0.560**
Low UAI	(3.56)	(1.74)	(4.22)	(3.23)	(1.72)	(2.55)
Median UAI	1.147***	0.426	0.721***	1.010***	0.488	0.521**
Median UAI	(2.93)	(1.05)	(3.24)	(2.61)	(1.24)	(2.13)
High UAI	1.083***	1.170***	−0.087	1.140***	1.212***	−0.073
High UAI	(3.09)	(3.11)	(−0.40)	(3.02)	(2.93)	(−0.29)
High-Low	−0.369	0.445*	−0.814***	−0.179	0.454	−0.632**
High-Low	(−1.35)	(1.76)	(−3.32)	(−0.60)	(1.49)	(−2.02)
High debt ratio
Low UAI	1.011**	0.762*	0.249	0.970**	0.793*	0.178
Low UAI	(2.36)	(1.82)	(1.20)	(2.26)	(1.85)	(0.80)
Median UAI	0.872**	0.390	0.482**	0.689*	0.416	0.273
Median UAI	(2.35)	(0.99)	(2.44)	(1.79)	(1.01)	(1.08)
High UAI	0.732**	0.705*	0.028	0.656	0.756*	−0.100
High UAI	(2.01)	(1.73)	(0.11)	(1.63)	(1.70)	(−0.35)
High-Low	−0.279	−0.058	−0.222	−0.315	−0.037	−0.278
High-Low	(−1.02)	(−0.19)	(−0.71)	(−1.04)	(−0.12)	(−0.87)

Note(s): This table reports the country-average asset growth premia conditional on debt ratios. For each country, we first classify individual stocks into three groups according to their values of debt ratio and then rank individual stocks in ascending order based on their asset growth (TAG) calculated at the end of the previous fiscal year within each group. Within each group of debt ratio, we classify firms into deciles, with TAG values ranked in the bottom 10% assigned to the AG1 portfolio and those ranked in the top 10% assigned to the AG10 portfolio. The portfolios are held with equal or value weights from July of each year to June of the next year and are rebalanced at the end of June every year. The country-specific asset growth premium is defined as the difference in returns between AG1 and AG10 portfolios within each group of the country. Panel A reports country-average asset growth premia across all countries for each group of debt ratio. We next classify all countries into three groups based on their scores of IDV or UAI and calculate the country-average asset growth premia within each debt-ratio and cultural subgroup. Panel B reports the results based on individualism while Panel C reports the results based on uncertainty avoidance. Numbers in the parentheses are the t-statistics calculated using Newey and West's (1987) robust standard errors. ***, ** and * denote significance at the 1%, 5% and 10% levels, respectively

Source(s): Author's work

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