Interaction impact of cash flow volatility and fixed assets on debt maturity structure in MENA and African countries

Figures & data

Table 1. Summary of descriptive statistics for MENA & African markets (full sample).

Variable	Definition	Mean	SD	Min	Max
SDEBITDA	Standard deviation of earnings before interest, tax, depreciation, and amortization	0.3344	19.9969	0	145.76
LDTD	Long-term debt to total debt ratio	0.3655	0.3644	0	1
FATA	Fixed assets to total assets ratio	0.9502	39.9791	0.1	0.9994
LNTA	Natural logarithmic of total assets	7.7858	1.8999	0	11.1119
DTA	Depreciation to total assets ratio	0.0313	1.8013	0	0.330
MB	Market value of total assets to book value of total assets ratio	9.4706	341.24	0.01	3290.38
LEV	Total liabilities to total assets ratio	0.6975	18.763	0	1
PROFIT	Earnings before interest and tax to total assets ratio	30.6420	37.71	−24.428	39.50
SMG	Total market value of all publicly traded stock to GDP ratio	71.5018	88.834	0.02	345.3531
ML	Credit of private sector as a percentage of GDP	54.6051	40.081	0.1	138.857
IR	Annual real interest rate adjusted to inflation	2.6611	9.203	−79.803	40.8599
GDPG	Percentage change of annual real GDP	2.7127	3.7569	−14.894	19.675

Sources: Refinitiv DataStream and World Data Indicators.

Table 2. Correlation results.

	LDTD	SDEBITDA	FATA	LNTA	DTA	MB	LEV	PROFIT	IR	ML	SMG	GDPG
LDTA	1
SDEBITDA	−0.011	1
	0.253
FATA	0.012	0.024	1
	0.206	0.010
LNTA	0.300	−0.033	−0.014	1
	0.000	0.000	0.125
DTA	0.013	0.020	0.994	−0.013	1
	0.166	0.033	0.000	0.161
MB	−0.018	0.486	0.193	−0.044	0.193	1
	0.049	0.000	0.000	0.000	0.000
LEV	−0.008	0.996	−0.0003	−0.026	−0.0002	0.882	1
	0.380	0.000	0.975	0.005	0.983	0.000
PROFIT	−0.009	0.991	0.003	−0.02	0.003	0.837	0.992	1
	0.300	0.000	0.718	0.004	0.728	0.000	0.000
IR	0.009	−0.003	0.002	0.016	0.002	0.004	0.004	0.003	1
	0.303	0.738	0.827	0.089	0.828	0.656	0.652	0.740
ML	0.084	0.010	−0.015	0.111	−0.012	0.023	0.011	0.009	0.121	1
	0.000	0.274	0.114	0.000	0.203	0.014	0.250	0.325	0.000
SMG	0.166	0.001	−0.009	0.167	−0.007	0.015	0.002	−0.001	0.071	0.580	1
	0.000	0.880	0.341	0.000	0.407	0.097	0.815	0.842	0.000	0.000
GDPG	−0.109	−0.045	0.020	−0.168	0.019	−0.045	−0.048	−0.044	0.070	−0.212	−0.332	1
	0.000	0.000	0.033	0.000	0.046	0.000	0.000	0.000	0.000	0.000	0.000

Note. ‘SDEBITIDA’ is the standard deviation of EBITDA. ‘DLTD’ is the ratio of long-term debt to total debt. ‘FATA’ is the ratio of fixed assets to total assets. ‘LNTA’ is the natural logarithmic of total assets. ‘DTA’ is the ratio of depreciation to total assets. ‘MB’ is the ratio of market value of total assets to book value of total assets ratio. ‘LEV’ is the ratio of total liabilities to total assets. ‘PROFIT’ is the ratio of earnings before interest and tax to total assets. ‘SMG’ is the ratio of total market value of all publicly traded stock to GDP ratio. ‘ML’ is the ratio of credit of private sector as a percentage of GDP. ‘IR’ is the annual real interest rate adjusted to inflation. ‘GDPG’ is the percentage change of annual real GDP.

Table 3. Regression results of cash flow volatility effect on debt maturity structure (model 1).

	Pooled OLS	Random effects model	Fixed effects model	OLS with correction of Auto & Hetero	Two-step system GMM (without constant)
Variables	LDTD	LDTD	LDTD	LDTD	LDTD
L.LDTD (Lag of Long-term Debt Ratio)	Nil	Nil	Nil	Nil	0.6201***
					(133.54)
SDEBITDA (Cash Flow Volatility)	0.0077**	0.0004	0.0004	0.0007***	−0.0002***
	(2.06)	(1.44)	(1.22)	(2.98)	(−6.14)
FATA (Fixed Assets)	0.0002***	0.0001*	0.0000	0.0002***	−0.0007***
	(2.72)	(1.65)	(1.39)	(7.72)	(−39.42)
LNTA (Log of Total Assets)	0.0531***	0.0371***	0.0344***	0.0531	0.0181***
	(29.86)	(23.31)	(21.00)	(19.62)	(32.35)
MB (Market to Book Ratio)	−0.00005**	−0.0003*	−0.00003*	−0.00005	−0.00001***
	(−2.46)	(−1.98)	(−1.75)	(−3.16)	(−6.02)
IR (Interest Rate)	0.00006	0.00007	0.0001	0.00006	0.0005***
	(0.18)	(0.27)	(0.52)	(0.12)	(2.83)
ML (Market Liquidity)	−0.0002**	−0.0003***	−0.0004***	−0.0002	−0.0005***
	(−2.21)	(−2.69)	(−3.43)	(−1.24)	(−8.00)
SMG (Stock Market Growth)	0.0005***	0.0004***	0.0003***	0.0005	0.0004***
	(10.85)	(7.93)	(5.16)	(6.34)	(7.44)
GDPG (Economic Growth rate)	−0.0026***	−0.0056***	−0.0062***	−0.0026	−0.0008***
	(−2.83)	(−7.79)	(−8.51)	(−2.30)	(−2.13)
Constant	−0.0658***	0.0780***	0.1165***	−0.0658
	(−4.31)	(4.64)	(6.89)	(−2.85)
Observations (N*T)	10,890	10,890	10,890	10,890	9,900
R-squared	0.1060		0
Number of firms	990	990	990	990	990
Number of Instruments	Nil	Nil	Nil	Nil	114
Breusch-Pagan LM test (Probability Value)		0.0000
Hausman test (Probability Value)			0.0000
Multicollinearity (VIF)			2.27
Heteroscedasticity (Probability Value)			0.0000
Serial Correlation (Probability Value)			0.0000
Autocorrelation (AR 1) (Probability Value)	Nil	Nil	Nil	Nil	0.0000
Autocorrelation (AR 2) (Probability Value)	Nil	Nil	Nil	Nil	0.6721
Sargan/Hansen Test (Probability Value)	Nil	Nil	Nil	Nil	0.2301
Industry Dummy	Yes	Yes	Yes	Yes	Yes

Note. ‘L.LDTD’ is the lag of long-term debt to total debt ratio. ‘SDEBITDA’ is the standard deviation of earnings before interest, tax, depreciation, and amortization. ‘FATA’ is the fixed assets to total assets ratio. ‘LNTA’ is the natural logarithm of total assets. ‘MB’ is the market value of total assets to book value of total assets ratio. ‘IR’ is the annual real interest rate adjusted to inflation. ‘ML’ is the credit of private sector as a percentage of GDP. ‘SMG’ is the total market value of all publicly traded stock to GDP ratio. ‘GDPG’ is the percentage change of annual real GDP. Asterisks indicate significance at the 10% (*), 5% (**), and 1% (***) levels.

Table 4. Regression results of the interaction effect of cash flow volatility and fixed asset on debt maturity structure (model 2).

	Pooled OLS	Random effects model	Fixed effects model	OLS with correction of Auto & Hetero	Two-step system GMM (without constant)
Variables	LDTD	LDTD	LDTD	LDTD	LDTD
L.LDTD (Lag of Debt Ratio)	Nil	Nil	Nil	Nil	0.6198***
					(133.54)
SDEBITDA (Cash Flow Volatility)	0.0008**	0.0005	0.0004	0.0008***	−0.0002***
	(2.32)	(1.60)	(1.22)	(2.82)	(−6.21)
FATA (Fixed Assets)	0.0061***	0.0026**	0.00009	0.0061	0.0016***
	(4.39)	(2.45)	(1.39)	(2.25)	(17.29)
SDEBITDA*FATA	−0.0001***	−0.0005**	−0.0004*	−0.0001**	−0.0003***
	(−4.22)	(−2.35)	(−1.99)	(−2.15)	(−23.15)
LNTA (Log of Total Assets)	0.0527***	0.0370***	0.0344***	0.0527***	0.0181***
	(29.59)	(23.18)	(21.00)	(19.47)	(32.29)
MB (Market to Book Ratio)	−0.00006***	−0.00004**	−0.00003*	−0.00006***	−0.00001***
	(−2.69)	(−2.11)	(−1.75)	(−2.90)	(−5.99)
IR (Interest Rate)	0.00009	0.00008***	0.0001	0.00009	0.0005***
	(0.27)	(30.31)	(0.52)	(0.19)	(2.85)
ML (Market Liquidity)	−0.0002**	−0.0003***	−0.0004***	−0.0002	−0.0005***
	(−2.21)	(−2.68)	(−3.43)	(−1.24)	(−7.99)
SMG (Stock Market Growth)	0.0005***	0.0004***	0.0003***	0.0005***	0.0004***
	(10.89)	(7.95)	(5.16)	(6.37)	(7.41)
GDPG (Economic Growth rate)	−0.0026***	−0.0056**	−0.0063***	−0.0026	−0.0009**
	(−2.81)	(−7.77)	(−8.51)	(−2.27)	(−2.20)
Constant	−0.0654	0.0780***	0.1165***	−0.0654
	(−4.28)	(4.64)	(6.89)	(2.84)
Observations (N*T)	10,890	10,890	10,890	10,890	9,900
R-squared	0.1075
Number of firms	990	990	990	990	990
Number of Instruments	Nil	Nil	Nil		115
Breusch-Pagan LM test (Probability Value)		0.0000
Hausman test (Probability Value)			0.0000
Multicollinearity (VIF)			2.27
Heteroscedasticity (Probability Value)			0.0000
Serial Correlation (Probability Value)			0.0000
Autocorrelation (AR 1) (Probability Value)	Nil	Nil	Nil	Nil	0.0000
Autocorrelation (AR 2) (Probability Value)	Nil	Nil	Nil	Nil	0.6836
Sargan/Hansen Test (Probability Value)	Nil	Nil	Nil	Nil	0.3300
Industry Dummy	Yes	Yes	Yes	Yes	Yes

Note. ‘L.LDTD’ is the lag of long-term debt to total debt ratio. ‘SDEBITDA’ is the standard deviation of earnings before interest, tax, depreciation, and amortization. ‘FATA’ is the fixed assets to total assets ratio. ‘LNTA’ is the natural logarithm of total assets. ‘MB’ is the market value of total assets to book value of total assets ratio. ‘IR’ is the annual real interest rate adjusted to inflation. ‘ML’ is the credit of private sector as a percentage of GDP. ‘SMG’ is the total market value of all publicly traded stock to GDP ratio. ‘GDPG’ is the percentage change of annual real GDP. Asterisks indicate significance at the 10% (*), 5% (**), and 1% (***) levels.

Data availability statement

The data supporting the findings of this study are available from the corresponding author, Abdulrahman Naser, upon reasonable request.