Using Firm-Level Favoritism to Better Understand the External Financing and Capital Expenditure Anomalies

The Effects of the Tax Cuts and Jobs Act of 2017 on Defined Benefit Pension Contributions*

“…AdjFCF is computed as ( oancf t − capx t + pbec t )/ at t− 1 . NetDebtFin is defined as in Faurel et al (2018) as net debt financing, measured as the cash proceeds from the issuance of long‐term debt less cash payments for long‐term debt reductions plus the net changes in current debt, scaled by beginning‐of‐year total assets ( dltis t − dltr t + dlcch t )/ at t− 1 , winsorized at the 1st and 99th percentile by year. NetEqFin is defined as in Faurel et al (2018) as cash proceeds from the sale of common and preferred stock less cash payments for the purchase of common and preferred stock less cash payments for dividends, scaled by beginning‐of‐year total assets ( sstk t − prstkc t − dv t )/ at t− 1 , winsorized at the 1st and 99th percentile by year.…”

“…NetDebtFin is defined as in Faurel et al (2018) as net debt financing, measured as the cash proceeds from the issuance of long‐term debt less cash payments for long‐term debt reductions plus the net changes in current debt, scaled by beginning‐of‐year total assets ( dltis t − dltr t + dlcch t )/ at t− 1 , winsorized at the 1st and 99th percentile by year. NetEqFin is defined as in Faurel et al (2018) as cash proceeds from the sale of common and preferred stock less cash payments for the purchase of common and preferred stock less cash payments for dividends, scaled by beginning‐of‐year total assets ( sstk t − prstkc t − dv t )/ at t− 1 , winsorized at the 1st and 99th percentile by year. ZScore [the Altman (1968) Z ‐score, calculated as −1×{3.3 × [( pi + xint )/ at ] + 1.1 × ( wcap / at ) + ( sale / at ) + 1.4 × ( re / at ) + 0.6 × [( chso × prcc_f )/ lt ]} all measured at time t ] equals one if the firm‐year Zscore is above the median Zscore for that year and zero otherwise.…”

“…32 32 Measures of net change in debt financing [( dltis t − dltr t + dlcch t )/ at t− 1 ] and net change in equity financing [( sstk t − prstkc t − dv t )/ at t− 1 ] follow measures from Faurel et al (2018). Free cash flow is defined as [( oancf t − capex t + pbec t )/ at t− 1 ].…”