EXCESS_SFG

=

The difference between a firm’s actual sales growth rate and its predicted short-term debt financed growth rate. For each firm, the predicted short-term debt financed growth rate is defined as ROLTC/(1-ROLTC), where ROLTC is the ratio of earnings after tax and interest to long-term capital.

EXCESS_IG

=

The difference between a firm’s actual sales growth rate and its predicted internally financed growth rate. For each firm, the predicted internally financed growth rate is defined as ROA*b/(1-ROA*b), where ROA is the ratio of earnings after taxes and interest to assets, and b is the proportion of the firm’s earnings that are retained for reinvestment.

NUMBER_GEO_SEGMENT

=

Number of geographic segments.

NUMBER_PRODUCT_SEGMENT

=

Number of product segments.

NEG_HERF_GEO_SALES

=

The negative Herfindahl index of geographic segment sales. We multiply Herfindahl index of geographic segment sales by minus one. Herfindahl index of geographic segment sales equals the sum of the squared proportional sales of each geographic segment.

NEG_HERF_PRODUCT_SALES

=

The negative Herfindahl index of product segment sales. We multiply Herfindahl index of product segment sales by minus one. Herfindahl index of product segment sales equals the sum of the squared proportional sales of each product segment.

FOR_SALES

=

The ratio of foreign sales to total sales.

DIV/TA

=

Total dividends divided by total assets.

NI/NS

=

Earnings after interest and taxes divided by net sales.

SIZE

=

Natural log of total assets.

TOBIN’S_Q

INVESTMENT

=

=

(Market value of equity + book value of liabilities)/total assets.

The sum of research and development expenditure, capital expenditure, and acquisition expenditure less cash receipts from sale of property, plant, and equipment in year t − 1 multiplied by 100 and scaled by lagged total assets.

CGS

=

An indicator variable that equals one if the corporate governance CGQ index is higher than the median, and equals zero otherwise. We obtain the Corporate Governance Quotient (CGQ) database from ISS. The CGQ index is the sum of the 44 attributes that cover four sub-categories: 1) Board (25 attributes), 2) Audit (3 attributes), 3) Anti-takeover (6 attributes) and 4) Compensation and Ownership (10 attributes). Each attribute is either 1 or 0. The sum of the 44 attributes is the CGQ index.

DGSE

=

An indicator variable that equals one if the geographic segment earnings (or operating income) information is disclosed in Worldscope database, and equals zero otherwise. The geographic segment data is given for up to ten geographic segments of a company. OPERATING INCOME represents the operating income generated from the geographic region updated in the respective description.