Table 4 Dynamic panel data estimation:...

Table 4

Dynamic panel data estimation: derivatives and cost of capital

Variables	Definition	Model 1	Model 2	Model 3
Variables	Definition	WACC	$K_{E}$	$K_{D}$
$γ$	Lagged-dependent	0.952***	0.740***	0.921***
$γ$	Lagged-dependent	(0.0087)	(0.0055)	(0.0113)
$β$	Derivatives-use	−0.611***	−0.599***	−0.221***
$β$	Derivatives-use	(0.0357)	(0.0456)	(0.0769)
$ϑ$	Leverage	−0.00697***	0.0423***	0.000611
$ϑ$	Leverage	(0.0014)	(0.0024)	(0.0034)
$ϕ$	Cash flows	−1.309**	−0.179**	−0.832***
$ϕ$	Cash flows	(0.0764)	(0.0822)	(0.0605)
$π$	Asset_Tangibility	−6.061***	−3.943***	−6.599***
$π$	Asset_Tangibility	(0.4130)	(0.1190)	(0.5940)
$λ$	Size	−0.222***	−3.57E−05	−0.222***
$λ$	Size	(0.0460)	(0.0325)	(0.0697)
$ξ$	Liquidity	−0.0423	0.239**	−0.0562
$ξ$	Liquidity	(0.0585)	(0.0390)	(0.1310)
Observations		1,045	1,045	1,029
AR(2)		0.48	0.51	0.08
Hansen-test		0.34	0.39	0.14

Variables	Definition	Model 1	Model 2	Model 3
Variables	Definition	WACC	$K_{E}$	$K_{D}$
$γ$	Lagged-dependent	0.952***	0.740***	0.921***
$γ$	Lagged-dependent	(0.0087)	(0.0055)	(0.0113)
$β$	Derivatives-use	−0.611***	−0.599***	−0.221***
$β$	Derivatives-use	(0.0357)	(0.0456)	(0.0769)
$ϑ$	Leverage	−0.00697***	0.0423***	0.000611
$ϑ$	Leverage	(0.0014)	(0.0024)	(0.0034)
$ϕ$	Cash flows	−1.309**	−0.179**	−0.832***
$ϕ$	Cash flows	(0.0764)	(0.0822)	(0.0605)
$π$	Asset_Tangibility	−6.061***	−3.943***	−6.599***
$π$	Asset_Tangibility	(0.4130)	(0.1190)	(0.5940)
$λ$	Size	−0.222***	−3.57E−05	−0.222***
$λ$	Size	(0.0460)	(0.0325)	(0.0697)
$ξ$	Liquidity	−0.0423	0.239**	−0.0562
$ξ$	Liquidity	(0.0585)	(0.0390)	(0.1310)
Observations		1,045	1,045	1,029
AR(2)		0.48	0.51	0.08
Hansen-test		0.34	0.39	0.14

Note(s): Robust standard errors in parentheses. AR (2) tests for autocorrelation, Hansen test tests for over-identification of instruments. ***p < 0.01, **p < 0.05,*p < 0.1 denote significance at 1%, 5% and 10% level respectively

Source(s): Author’s compilation from raw data

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