Description and computation of variables
| Variables | Proxy | Description |
|---|---|---|
| SIZE | Market capitalisation | It is computed by multiplying the stock price by the number of shares outstanding as of the end of September of the year |
| Value | Book-to-market equity | It is the inverse price-to-book ratio as of March’s end-of-year t |
| Profit | Operating profit | It is the ratio of operating profit to book equity as of March end of each year t |
| Investment | Total asset growth | It is the increase or decrease in total assets from March end of year t to March end of year t + 1, divided by the total assets at the end of year t |
| Relative distress premium (RD) | Altman Z score | It is the difference between the distressed firms portfolio and safe (non-distressed) firms portfolio on the basis of the Altman Z score at the March end of year t |
| Variables | Proxy | Description |
|---|---|---|
| SIZE | Market capitalisation | It is computed by multiplying the stock price by the number of shares outstanding as of the end of September of the year |
| Value | Book-to-market equity | It is the inverse price-to-book ratio as of March’s end-of-year |
| Profit | Operating profit | It is the ratio of operating profit to book equity as of March end of each year |
| Investment | Total asset growth | It is the increase or decrease in total assets from March end of year |
| Relative distress | Altman Z score | It is the difference between the distressed firms portfolio and safe (non-distressed) firms portfolio on the basis of the Altman Z score at the March end of year |
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