Table 3 Cross-sectional variations in...

Table 3

Cross-sectional variations in the effect of financial reporting quality on corporate hedging activities: the role of precautionary saving demand

	WW index				SA index
	[1]	[2]	[3]	[4]	[5]	[6]	[7]	[8]
EQ1	−0.000				0.023
EQ1	(−0.00)				(0.69)
EQ1high*	0.108***				0.063
EQ1high*	(2.87)				(1.61)
EQ2		0.01				0.035
EQ2		(0.09)				(0.68)
EQ2high*		0.184***				0.153***
EQ2high*		(2.70)				(2.76)
EQ3			−0.025				−0.028
EQ3			(−1.28)				(−1.21)
EQ3high*			0.109***				0.090***
EQ3high*			(5.46)				(4.25)
EQ4				0.001				0.008
EQ4				(0.06)				(0.31)
EQ4high*				0.087***				0.054**
EQ4high*				(3.82)				(2.12)
high	−0.001	−0.003	−0.006	−0.003	0.012***	0.009*	0.007	0.010**
high	(−0.28)	(−0.40)	(−1.14)	(−0.62)	(2.69)	(1.75)	(1.60)	(2.44)
logasset	0.054***	0.057***	0.053***	0.054***	0.056***	0.058***	0.055***	0.055***
logasset	(25.46)	(24.22)	(25.18)	(25.47)	(28.44)	(26.83)	(28.13)	(28.33)
booklev	0.097***	0.099***	0.092***	0.093***	0.095***	0.099***	0.091***	0.091***
booklev	(9.02)	(8.53)	(9.04)	(9.08)	(9.15)	(8.66)	(9.19)	(9.21)
cash	−0.044***	−0.040***	−0.041***	−0.041***	−0.047***	−0.039***	−0.045***	−0.045***
cash	(−5.64)	(−4.18)	(−5.55)	(−5.62)	(−5.98)	(−4.11)	(−6.11)	(−6.14)
MB	0.002**	0.001	0.002**	0.002*	0.001	0.000	0.001	0.001
MB	(1.99)	(1.01)	(2.10)	(1.90)	(1.61)	(0.38)	(1.64)	(1.54)
profit	−0.034***	−0.032***	−0.041***	−0.041***	−0.035***	−0.031***	−0.041***	−0.041***
profit	(−3.43)	(−2.91)	(−4.44)	(−4.34)	(−3.66)	(−2.82)	(−4.46)	(−4.44)
tangib	−0.019	−0.014	−0.021*	−0.019*	−0.023*	−0.016	−0.024**	−0.022**
tangib	(−1.63)	(−0.97)	(−1.92)	(−1.69)	(−1.94)	(−1.13)	(−2.15)	(−2.00)
RDdummy	−0.017***	−0.020***	−0.016***	−0.016***	−0.017***	−0.020***	−0.016***	−0.017***
RDdummy	(−3.36)	(−3.38)	(−3.31)	(−3.33)	(−3.44)	(−3.44)	(−3.39)	(−3.41)
RDintens	0.054***	0.049**	0.050***	0.051***	0.048***	0.043**	0.047***	0.048***
RDintens	(3.01)	(2.27)	(2.95)	(3.01)	(2.76)	(2.03)	(2.84)	(2.87)
Constant	0.050	0.064	0.065	0.062	0.036	0.051	0.051	0.048
Constant	(0.91)	(0.96)	(1.17)	(1.11)	(0.64)	(0.74)	(0.90)	(0.85)
Industry dummy	Y	Y	Y	Y	Y	Y	Y	Y
Year dummy	Y	Y	Y	Y	Y	Y	Y	Y
Observations	51,934	39,087	59,386	59,386	52,422	39,267	60,006	60,006
R-squared	0.334	0.337	0.330	0.330	0.333	0.337	0.330	0.330

	WW index				SA index
	[1]	[2]	[3]	[4]	[5]	[6]	[7]	[8]
EQ1	−0.000				0.023
EQ1	(−0.00)				(0.69)
EQ1*high	0.108***				0.063
EQ1*high	(2.87)				(1.61)
EQ2		0.01				0.035
EQ2		(0.09)				(0.68)
EQ2*high		0.184***				0.153***
EQ2*high		(2.70)				(2.76)
EQ3			−0.025				−0.028
EQ3			(−1.28)				(−1.21)
EQ3*high			0.109***				0.090***
EQ3*high			(5.46)				(4.25)
EQ4				0.001				0.008
EQ4				(0.06)				(0.31)
EQ4*high				0.087***				0.054**
EQ4*high				(3.82)				(2.12)
high	−0.001	−0.003	−0.006	−0.003	0.012***	0.009*	0.007	0.010**
high	(−0.28)	(−0.40)	(−1.14)	(−0.62)	(2.69)	(1.75)	(1.60)	(2.44)
logasset	0.054***	0.057***	0.053***	0.054***	0.056***	0.058***	0.055***	0.055***
logasset	(25.46)	(24.22)	(25.18)	(25.47)	(28.44)	(26.83)	(28.13)	(28.33)
booklev	0.097***	0.099***	0.092***	0.093***	0.095***	0.099***	0.091***	0.091***
booklev	(9.02)	(8.53)	(9.04)	(9.08)	(9.15)	(8.66)	(9.19)	(9.21)
cash	−0.044***	−0.040***	−0.041***	−0.041***	−0.047***	−0.039***	−0.045***	−0.045***
cash	(−5.64)	(−4.18)	(−5.55)	(−5.62)	(−5.98)	(−4.11)	(−6.11)	(−6.14)
MB	0.002**	0.001	0.002**	0.002*	0.001	0.000	0.001	0.001
MB	(1.99)	(1.01)	(2.10)	(1.90)	(1.61)	(0.38)	(1.64)	(1.54)
profit	−0.034***	−0.032***	−0.041***	−0.041***	−0.035***	−0.031***	−0.041***	−0.041***
profit	(−3.43)	(−2.91)	(−4.44)	(−4.34)	(−3.66)	(−2.82)	(−4.46)	(−4.44)
tangib	−0.019	−0.014	−0.021*	−0.019*	−0.023*	−0.016	−0.024**	−0.022**
tangib	(−1.63)	(−0.97)	(−1.92)	(−1.69)	(−1.94)	(−1.13)	(−2.15)	(−2.00)
RDdummy	−0.017***	−0.020***	−0.016***	−0.016***	−0.017***	−0.020***	−0.016***	−0.017***
RDdummy	(−3.36)	(−3.38)	(−3.31)	(−3.33)	(−3.44)	(−3.44)	(−3.39)	(−3.41)
RDintens	0.054***	0.049**	0.050***	0.051***	0.048***	0.043**	0.047***	0.048***
RDintens	(3.01)	(2.27)	(2.95)	(3.01)	(2.76)	(2.03)	(2.84)	(2.87)
Constant	0.050	0.064	0.065	0.062	0.036	0.051	0.051	0.048
Constant	(0.91)	(0.96)	(1.17)	(1.11)	(0.64)	(0.74)	(0.90)	(0.85)
Industry dummy	Y	Y	Y	Y	Y	Y	Y	Y
Year dummy	Y	Y	Y	Y	Y	Y	Y	Y
Observations	51,934	39,087	59,386	59,386	52,422	39,267	60,006	60,006
R-squared	0.334	0.337	0.330	0.330	0.333	0.337	0.330	0.330

Note(s): This table reports the cross-sectional variations in the effect of financial reporting on corporate hedging activities. The dependent variable is the hedging intensity. EQs are financial reporting quality measures, with higher values in EQs indicating lower financial reporting quality. The partitioning variable is a firm’s precautionary saving demand. The proxy for precautionary saving demand is financial constraint measured with WWindex (Whited & Wu, 2006) and SAindex (Hadlock & Pierce, 2010), respectively. With each proxy, we partition the sample in a year into two subsets and assign the indicator variable high to be one when the firm is classified as a financially constrained firm, i.e. the WW index (or SA index) is above the annual industry-wide median. The model includes industry (based on the Fama and French 48 industry classification) and year fixed effects. t-statistics are reported in parentheses and are based on standard errors adjusted for clustering at the firm and year level. ***, ** and * indicate significance levels of 1, 5 and 10%, respectively

Source(s): The authors

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