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 | − | |
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 | + | |