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Table 8 Ordered Probit regression results of the relationship between credit rating and deviation from optimal working capital

From: The impact of working capital management on credit rating

\(\begin{aligned} RATING_{i,t } & = a_{0} + \delta_{1} DEV_{i,t } + \delta_{2} DEV_{i,t} *above + \delta_{3} SIZE_{i,t } + \delta_{4} LEV_{i,t } + \delta_{5} COVERAGE_{i,t } \\ & \quad + \delta_{6} LOSS_{i,t } + \delta_{7} CAP_{INTEN\;i,t} + \delta_{8} SUBORD_{i,t } + \delta_{9} BIG4_{i,t} + \varepsilon_{i,t } \\ \end{aligned}\)
Dependent variable Rating
Column 1 Column 2
DEV  − 0.009***  − 0.010***
(0.001) (0.001)
DEV*ABOVE   0.0020***
  (0.0002)
SIZE 0.503*** 0.507***
(0.005) (0.005)
COVERAGE 0.056*** 0.056***
(0.001) (0.001)
LEV  − 1.528***  − 1.520***
(0.038) (0.038)
CAP_INTEN 0.318*** 0.339***
(0.017) (0.172)
LOSS  − 0.638***  − 0.635***
(0.016) (0.016)
BIG4  − 0.017  − 0.017
(0.013) (0.013)
SUBORD  − 0.136*  − 0.131*
(0.072) (0.072)
Year effect Yes Yes
Industry effect Yes Yes
Pseudo R2 0.2883 0.2892
Firm-year observations 37,923 37,923
Likelihood-ratio test   (0.000)
  1. Variable definitions are provided in Table 2. Standard errors are reported in parentheses. ***, **, and * indicate two-tailed significance at the 1%, 5%, and 10% levels. The results in this table are based on annual panel data of U.S. listed firms from WRDS merged with CRSP/Compustat files for the period between 1985 and 2017