Explanation of the variables
| Variables | Type | Description |
|---|---|---|
| EVA | Financial performance related variables | NOPAT – (WACC* Invested capital) |
| Tobin’s Q | Total Market value of firm/ Total Asset value of firm | |
| ESG score | Sustainability related variables | ESG performance score on firm’s environmental. social and governance activities |
| Beta (systematic risk) | Firm-specific control variable | Beta factor firm’s systematic risk |
| Firm leverage | Total debt/equity in ratio represents firm’s leverage (unsystematic) risk | |
| Firm’s size | Natural logarithm of total assets | |
| Institutional Quality (IQ)_Overall | IQ specific variable | Average value of three chosen IQ indicators |
| Political stability | Likelihood of political instability and/or politically motivated violence. including terrorism | |
| Rule of Law | Extent to which agents have confidence in and abide by society’s rules. especially the quality of contract enforcement. property rights. the police. the courts. and the likelihood of crime and violence | |
| Control of corruption | Implies a reduction in the use of public resources for private gain | |
| Economic growth | Macroeconomic specific control variable | Rate of change of real GDP |
| GDP per capita | Gross domestic product divided by midyear population (in Euro) | |
| Inflation | Percent change in the Consumer Price Index | |
| ***IQ overall*Economic Growth | Interactional variable | **Moderating between IQ and Economic growth |
| Variables | Type | Description |
|---|---|---|
| EVA | Financial performance related variables | NOPAT – (WACC |
| Tobin’s Q | Total Market value of firm/ Total Asset value of firm | |
| ESG score | Sustainability related variables | ESG performance score on firm’s environmental. social and governance activities |
| Beta (systematic risk) | Firm-specific control variable | Beta factor firm’s systematic risk |
| Firm leverage | Total debt/equity in ratio represents firm’s leverage (unsystematic) risk | |
| Firm’s size | Natural logarithm of total assets | |
| Institutional Quality | IQ specific variable | Average value of three chosen IQ indicators |
| Political stability | Likelihood of political instability and/or politically motivated violence. including terrorism | |
| Rule of Law | Extent to which agents have confidence in and abide by society’s rules. especially the quality of contract enforcement. property rights. the police. the courts. and the likelihood of crime and violence | |
| Control of corruption | Implies a reduction in the use of public resources for private gain | |
| Economic growth | Macroeconomic specific control variable | Rate of change of real GDP |
| GDP per capita | Gross domestic product divided by | |
| Inflation | Percent change in the Consumer Price Index | |
| ***IQ overall | Interactional variable |
Notes:
**Moderator is the interaction of the variable’s standardized values; NOPAT = Net operating profit after taxes; *WACC = Weighted average cost of capital; GDP = Gross domestic product
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