| Variables | Definitions |
| Explained variable | |
| Capx | The level of capital expenditure, cash paid for the purchase and construction of fixed assets, intangible assets and other long-term assets as a percentage of operating income. |
| TQ | Tobin Q value, [(Total shares − B shares) * Closing price A-share current value + B shares*Closing price current value * Exchange rate for the day]/Total assets |
| RD | R&D intensity, total R&D expenditure as a percentage of operating revenue. |
| OCFVOL | Volatility of cash flow from operating activities, standard deviation of net cash flow from operating activities as a percentage of operating income for periods t − 1, t, and t + 1. |
| Debt cap | Level of new debt, new debt for the year as a percentage of total assets at the end of the previous period. |
| Explanatory variable | |
| DT | Dummy variable for the use of derivative, taking the value of 1 if derivatives are used and 0 otherwise. |
| DT ratio | Intensity of use of derivative, fair value of derivatives as a percentage of total assets at the end of the period. |
| POST2014 | The value is taken as 1 after the implementation of the 2014 standards on Presentation of Financial Instruments, Fair Value Measurement, and 0 otherwise. |
| Control variable | |
| Size | Firm size, the natural logarithm of the firm’s total assets at the end of the period. |
| PPE | Fixed assets, fixed assets as a percentage of total assets at the end of the period. |
| ROA | Return on total assets, EBIT/Average of total assets at beginning and end of period |
| Debt ratio | Gearing ratio, total liabilities /total assets at the end of the period. |
| Quick ratio | Quick ratio, quick assets/current liabilities. |
| Z | The likelihood of a firm’s financial failure or bankruptcy, the lower the z-value, the more likely the firm is to experience bankruptcy. |
| SGA | Non-debt tax shield, (administrative expenses + selling expenses)/operating income |
| MB | (Market value of equity + book value of liabilities)/Total assets. |
| Oversea | The percentage of overseas revenue, overseas revenue as a percentage of operating revenue. |
| Ic index | Dibble Internal Control Index, the higher the internal control index, the better the quality of internal control. |
| Ownership | The dummy variable for the nature of firm ownership, takes the value of 1 for SOEs and 0 for others. |
| Age | Firm age, The number of years since the company has been established. |
| Frisk | Exposure to exchange rate risk, absolute value of the regression coefficient of the company’s monthly stock return on the monthly effective exchange rate change of the CNY for the past three years (including the current year) |
| I risk | Interest rate risk exposure, absolute value of the regression coefficient of the company’s monthly stock return on the monthly change in SHIBOR over the past three years (including the current year) |
| C risk | Commodity price exposure, absolute value of the regression coefficient of the company’s monthly stock return on the monthly PPI change over the past three years (including the current year) |
| MI | Management compensation performance sensitivity, change in directors’ and supervisors’ income due to change in company value as a proportion of total directors’ and supervisors’ income, which is measured by number of shares held by directors and supervisors * closing price of shares/(number of shares held by directors and supervisors * closing price of shares + total annual remuneration of directors and supervisors) |
| CETR | The cash effective tax rate, the weight of the sum of the current year’s and the following year’s (t + 1) tax liabilities to the sum of operating profits, is reset to 1 if it exceeds 1, or to 0 if it is less than 0 |
| ROAVOL | Volatility of return on total assets, standard deviation of return on total assets over the last five years (including the current year). |
| NCFVOL | Volatility of cash flows from operating activities in the past five years (including the current year), standard deviation of net cash flows from operating activities as a percentage of operating income in the past five years (including the current year). |
| Industry | Industry control variables |
| Year | Year control variables |