Name

Definition

T_lev

Estimated target leverage ratio, calculated using the methods present in 3.1

DEV

The gap between actual leverage and target leverage, calculated as $T\text{\_}Le{v}_{i,t}-Le{v}_{i,t-1}^p$ , $T\text{\_}Le{v}_{i,t}$ is the estimated target leverage; $Le{v}_{i,t-1}^p$ is the previous period’s total interest bearing debt divided by the sum of the previous period’s book assets plus current period net income

Δlev

The active leverage adjustment, calculated as $Le{v}_{i,t}-Le{v}_{i,t-1}^p$ , where $Le{v}_{i,t}$ is calculated as the sum of interest-bearing debt divided by total assets; $Le{v}_{i,t-1}^p$ is the previous period’s total interest bearing debt divided by the sum of the previous period’s book assets plus current period net income

MMC

Managerial Macro Cognition, calculated as numbers of macro-related words divided by total number of words in MD & A section of annual report

Lev

Book leverage, calculated as the sum of interest-bearing debt divided by total assets

EBIT

Earnings before interest and taxes as a measure of profitability, calculated as net income before interest and taxes divided by total assets

Dep

The nondebt tax shied, calculated as depreciation divided by total assets

Size

Firm size, calculated as the natural log of the book value of total assets

Tangibility

Asset tangibility, calculated as plants, property and equipment divided by total assets

TobinQ

The Tobin’s Q as a measure of growth opportunity, calculated as the sum of market value of equity and book value of total liability divided by book value of total assets

Ind_level

The industry leverage, calculated as the industry-year median leverage