	Unseg	Good Governance	Poor Governance
Variables	Expected	Expected	Expected	Explanation for Expected Results
LTS	Positive	?	?	Consistent with Frank and Goyal (2009) [30] we expect a positive relationship to hold for Unseg data. The relationship is unclear for good and poor governance firms.
MTB	Negative	Negative	Negative	MTB represents the growth opportunities available to the firm and the covenants placed by debt makes borrowing more costly for high growth firm. A negative relationship is expected for all three sets of data.
CAPEX	Positive	?	?	Consistent with Frank and Goyal (2003) [49] CAPEX is expected to be positively related with financial leverage for the Unseg data. The relationship for good and poor governance firms is ambiguous.
INTANG	Positive	Positive	Positive	Intangibility is expected to have a positive relationship with financial leverage for all three sets of data as observed in earlier studies.
CF	Positive	?	?	Cash flows are expected to be positively related to financial leverage for the Unseg data but given the expected results for profits, the anticipation for good and poor governance firms is ambiguous.
RISK	Negative	Negative	Negative	Volatility of cash flows is expected to be negatively related to financial leverage for the three sets of data as cash flow uncertainty acts as a hurdle in borrowing money.
MED	Positive	Positive	Positive	Managers follow industry standard in setting up leverage ratios and industry median leverage is expected to be positively related to financial leverage.
NWC	Negative	Negative	Negative	Net working capital is expected to be negatively related to financial leverage as it represents short term liquidity of the firm.