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Table 2 Variables definition

From: The impact of working capital management on credit rating

Variables definition Acronym Definition Predicted signs Relevant literature
Dependent variables  
Credit rating RATING Ordinal scale of 8 categories, values starting from 1 for ‘CC’ to 8 for ‘AAA’ rating   Kisgen (2006), Ashbaugh-Skaife et al. (2006), Attig et al. (2013), Bendig et al. (2017)
  MICRORATING Ordinal scale of 20 categories, ranging from 1 for ‘CC’ to 20 for ‘AAA’ class   Kisgen (2006), Attig et al. (2013), Bendig et al. (2017), Alissa et al. (2013)
Explanatory variables  
Operating working capital NWC Trade credit accounts receivable + inventory − accounts payable all divided by total sales  +  Aktas et al. (2015)
Cash conversion cycle CCC (inventory/cost of sales) × 365 + (accounts receivable/sales) × 365 − (accounts payable/cost of sales) × 365  +  Baños-Caballero et al. (2014)
Accounts receivable AR Accounts receivable/ sales  +  Aktas et al. (2015)
Inventory INV Inventory/cost of sales  +  Aktas et al. (2015)
Accounts payable AP Accounts payable/cost of sales  −  Aktas et al. (2015)
Control variables
Firm size SIZE Natural logarithm of total assets  +  Ashbaugh-Skaife et al. (2006), Alissa et al. (2013), Attig et al. (2013), Bendig et al. (2017), Dong et al. (2021)
Financial leverage LEV Total debt/total assets  −  Ashbaugh-Skaife et al. (2006), Attig et al. (2013), Bendig et al. (2017)
Interest coverage ratio COVERAGE Operating income before depreciation divided by total interest expenses  +  Ashbaugh-Skaife et al. (2006), Attig et al. (2013), Bendig et al. (2017)
Firm’s loss LOSS 1 if the firm has a negative net income for the current year and for the previous year as well, and 0 otherwise  −  Ashbaugh-Skaife et al. (2006), Attig et al. (2013), Bendig et al. (2017)
Subordinate debt SUBORD Binary variable that takes the value of 1 if the firm has subordinate debt, and 0 otherwise  −  Ashbaugh-Skaife et al. (2006), Bendig et al. (2017)
Capital intensity CAP_INTEN Gross property, plant, and equipment divided by total firm assets  +  Ashbaugh-Skaife et al. (2006), Alissa et al. (2013), Attig et al. (2013), Bendig et al. (2017)
Rank of auditing firm BIG4 Binary variable takes the value of 1 if the firm’s external auditor is ranked as one of the biggest four accounting firms, and 0 otherwise  +  Attig et al. (2013) Bhandari and Golden (2021)