3 The Database is constructed from annual business reports of unconsolidated listed firms and the annual volumes (1965- 1990) of the Handbuch Der Aktiengesellschaften and the Statistisches Jahrbuch . The specific variables drawn from the Bonn Database and listed in the tables are defined as follows: BANKDEBT = Long-term bank debt (maturities ≥ five years) not secured by mortgages divided by TOTALASSETS. BANKDEBT ' = Long-term bank debt (maturities ≥ five years) not secured by mortgages divided by long-term debt (maturities ≥ five years). DIVIDENDS = Dividends on common and preferred equity divided by TOTALASSETS (multiplied by 100). FIXED = Fixed assets less depreciation divided by TOTALASSETS. 3 All but one of the firms is organized as an AG. The designation "AG" (Aktiengesellschaft, stock corporation) in Germany is comparable to "LTD" in the United Kingdom and "INC" in the United States. One firm is a KGaA (Kommanditgesellschaft auf Aktien), a hybrid between a limited liability partnership and a stock corporation with tradable shares. See Edwards and Fischer (1994, Chapter 4) for more information about the legal forms of enterprises in Germany.
6 GROWTH = Investment in fixed assets divided by the replacement cost of fixed assets. ICOVERAGE = The inverse of the coverage ratio (cash flow divided by total interest expenses, with cash flow defined as before-tax income plus depreciation). LEVERAGE = The book value of all of the firm's liabilities (long-term, maturities ≥ five years; medium-term, maturities ≥ one year but < five years; and short-term, maturities < one year) divided by TOTALASSETS. LT-DEBT = Long-term debt (maturities ≥ five years) divided by TOTALASSETS. MARKET/BOOK = The market value of equity (the number of shares outstanding at the end of the year multiplied by the year end share price) divided by the book value of equity. NET LT-DEBT = Net long-term debt, LT-DEBT - BANKDEBT. PROFITABILITY = Return on assets, equal to net income (after pension payments but before taxes) and interest expense both divided by TOTALASSETS (multiplied by 100). SIZE = An indicator variable ranging from 1 (smallest) to 4 (largest) defined by quartiles of TOTALASSETS. TOTALASSETS = The book value of all of the firm's assets less depreciation on fixed assets less Qualifying Reserves, stated in billions of Deutsche Marks. VOLATILITY = The standard deviation of cash flow (defined as before-tax income plus depreciation) divided by the mean of cash flow (i.e., the coefficient of variation of cash flow).
7 2.2. Bank Influence And Ownership Concentration The Bonn Database is supplemented with data on bank influence and ownership concentration obtained for 1966-1988 from company annual reports and annual issues of Wer Gehört Zu Wem and Atkienführer . Bank influence (BI) is an indicator variable measuring direct ownership by a financial institution, and is defined as follows: BI equals 1 if a national bank or a national insurance company a) holds more than 25% of the outstanding shares and no other owner holds more than 25% or b) holds more than 50% of the outstanding shares; 0 otherwise (i.e., BI equal 1 when a national bank or
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