Definitions of variables
| Variable | Definition | Source |
|---|---|---|
| Dependent variable | ||
| Distance-to-default (Miah and Uddin) | Risk neutral distance-to-default based on Merton (1974) | Credit research initiative |
| Independent variable | ||
| Director ownership | Percentage of shareholdings by Directors | NIKKEI NEEDS CGES database |
| CEO ownership | Percentage of shareholdings by CEO | Same as above |
| Employee ownership | Percentage of shareholdings by Employees | Same as above |
| Control variable | ||
| LNS | The natural log of sales, used to measure firm size | DataStream |
| K/S | The ratio of tangible, long-term assets (property, plant and equipment) to sales is used to measure the mitigation of agency problems as it can be stated that these assets can be easily monitored and provide proper collateral | DataStream |
| Y/S | The ratio of EBITDA (earnings before interest, tax, depreciation and amortization) to sales | DataStream |
| R&D/K | The ratio of research and development expenditures to property, plant and equipment. We set missing observations of R&D/K equal to zero to maintain sample size | DataStream |
| RDUM | A dummy variable is equal to one if R&D data are available, and zero otherwise. This variable allows the intercept term to capture the mean of R&D/K for missing values | DataStream |
| I/K | The ratio of capital expenditures to property, plant and equipment | DataStream |
| ROA | Net income before extraordinary items and discontinued operations divided by total assets multiplied by 100 | DataStream |
| Leverage | Long-term debt divided by the book value of total assets | DataStream |
| Age | One plus the listing age of a firm as measured by the number of years from its IPO as reported in CRSP | DataStream |
| ROA volatility | The rolling standard deviation of ROA for the year t plus the previous two years | Authors’ calculation |
| Stock volatility | The rolling standard deviation of stock return for the year t plus the previous two years | Authors’ calculation |
| Altman Z score | Z score = 1.2A + 1.4B + 3.3C + 0.6D+1.0E A = Working capital/Total Assets; B= Retained Assets/Total Assets; C = Earning before tax and interest/Total Assets; D = Market value of equity/Total liabilities and E = Sales/Total Assets | Authors’ calculation |
| Institutional ownership | % of shareholding by trust account+ % of shareholding by foreign investor+ % of shareholding by special account | |
| Analyst coverage | The number of analysts following the firms in a given year | Refinitiv Datastream |
| Variable | Definition | Source |
|---|---|---|
| Distance-to-default (Miah and Uddin) | Risk neutral distance-to-default based on | Credit research initiative |
| Director ownership | Percentage of shareholdings by Directors | NIKKEI NEEDS CGES database |
| CEO ownership | Percentage of shareholdings by CEO | Same as above |
| Employee ownership | Percentage of shareholdings by Employees | Same as above |
| LNS | The natural log of sales, used to measure firm size | DataStream |
| K/S | The ratio of tangible, long-term assets (property, plant and equipment) to sales is used to measure the mitigation of agency problems as it can be stated that these assets can be easily monitored and provide proper collateral | DataStream |
| Y/S | The ratio of EBITDA (earnings before interest, tax, depreciation and amortization) to sales | DataStream |
| R&D/K | The ratio of research and development expenditures to property, plant and equipment. We set missing observations of R&D/K equal to zero to maintain sample size | DataStream |
| RDUM | A dummy variable is equal to one if R&D data are available, and zero otherwise. This variable allows the intercept term to capture the mean of R&D/K for missing values | DataStream |
| I/K | The ratio of capital expenditures to property, plant and equipment | DataStream |
| ROA | Net income before extraordinary items and discontinued operations divided by total assets multiplied by 100 | DataStream |
| Leverage | Long-term debt divided by the book value of total assets | DataStream |
| Age | One plus the listing age of a firm as measured by the number of years from its IPO as reported in CRSP | DataStream |
| ROA volatility | The rolling standard deviation of ROA for the year | Authors’ calculation |
| Stock volatility | The rolling standard deviation of stock return for the year | Authors’ calculation |
| Altman Z score | Z score = 1.2A + 1.4B + 3.3C + 0.6D+1.0E | Authors’ calculation |
| Institutional ownership | % of shareholding by trust account+ % of shareholding by foreign investor+ % of shareholding by special account | |
| Analyst coverage | The number of analysts following the firms in a given year | Refinitiv Datastream |
Source(s): Table created by the authors