RDP 9313: The Determinants of Corporate Leverage: A Panel Data Analysis Appendix 1: Data

Geoffrey Shuetrim, Philip Lowe and Steve Morling

December 1993

Consumer price index is the ‘All Categories’ Consumer Price Index (CPI), calculated at 1984/85 prices and rebased to 1990.
Consumer price inflation is measured as the annual percentage change in the CPI.
Asset price index is a weighted average of a stock price index and a commercial properties price index. Both indices are based on March 1983 prices. The stock price index is given a weight of 0.585 and the commercial property price index is given a weight of 0.415. The stock price index is the All Ordinaries Index. The commercial property price index uses internal sources.
Real asset price index is the ratio of the asset price index to the CPI after rebasing both series to 1981 prices.
Real cost of debt is the prime interest rate charged on large business loans deflated by the consumption price deflator as reported in the Australian National Accounts (5204.0). The real cost of debt is also adjusted by the corporate tax rate to obtain an ‘after tax’ measure.
Prime interest rate is the maximum of the business indicator rates. It is reported in Table F3 of the Reserve Bank of Australia Bulletin.
Real cost of equity is estimated using a simple earnings-price model in which the required rate of return on equity equals the sum of the after tax earnings-price ratio and the expected growth in real earnings.
The aggregate earnings-price ratio is the index linked ratio calculated from a sample of companies from the All Ordinaries Firms. Each firm is weighted by its market capitalisation. It is available from the Australian Stock Exchange.
Expected growth in real earnings is estimated as a 10-year moving average of growth in real non farm Gross Domestic Product (GDP), as deflated by the non-farm GDP deflator (also from the Australian National Accounts, 5204.0).
Financial statement data is measured in book values. The data is described in full in Lowe and Shuetrim (1992).
Real total assets is the book value of total assets divided by the Consumer Price Index.
Cash flow is the ratio of earnings before depreciation, interest and taxation to the total assets of the firm. It is expressed as a percentage.
Firm growth is the annual percentage growth in firms' real total assets.
Real tangible assets includes net fixed assets, stock, debtors, government securities and bank deposits. Excluded are investments, equity holdings in other firms, inter-company accounts, intangibles and the residual category of ‘other assets’. It is expressed as a percentage of total assets.
Firm size is measured by the natural logarithm of real total assets. Real total assets were divided by 100,000 before the logarithm transformation.
Potential debt tax shield is the sum of interest paid and taxable income after all allowable non-debt tax deductions have been made. This sum is expressed as a percentage of total assets.
Tax exhaustion is a dummy variable that is set to unity for any observation where a firm pays no tax.
Industry dummy variables is based upon the industry classifications in the Reserve Bank of Australia Bulletin, Company Finance Supplement.
Listing dummy variable is set to unity for all firms that are listed. Again the listing classification is based upon the Reserve Bank of Australia Bulletin, Company Finance Supplement.