Communityenvironmental csr is the difference between community and environmental csr strengths and concerns from msci esg research database. Compustat business information files the compustat business information files are companions to the industrial annual files and consist of 2 auxiliary files and 9 subset files. Compustat also gives the book value of debt that has a maturity of greater than one year as dltt. Compustat global databases do not have any of these. Book value per share 28 calendar year 30 canadian index code 30 canadian index code current 30. Changes in current debt statement of cash flows 39 class code 40 common equity liquidation value.
In the example code, the following variables are retrieved. Compustatfundamentalsbalance sheet items firm size log. The mbe ratio is endogenous to a firms leverage decision, while the mba ratio cannot be calculated precisely if the market value of a firms debt differs significantly from its book value. I am experiencing difficulties finding the right items to calculate the book value of a firm from the compustat fundamentals quarterly. How can we calculate market value of equity and book value of. Book value share book value per share represents fiscal year end common equity liquidation value divided by fiscal year end common shares outstanding. The distribution of debt among the standard balance sheet classifications for the average firm in the sample is as follows. Longterm debt dltt plus debt in current liabilities dlc divided by book value of assets. Both markettobook ratios proxy for variables other than the investment opportunity set. Total, ceq book value of equity, datadate end of year date from. Column w lists the calculated value of ceql using just the variables. Google market to book and return on assets versus industry. This online appendix provides detailed derivation, variable definition, and. How to find book value of a debt on a balance sheet.
Mom cumulative past return cumulative return to the stock between month t2 and t12. Second, we use the ratio of the aggregate book value of debt to the sum of aggregate book value of debt and market value of stocks listed. The amortization table details this allocation and displays the amounts paid, along with the current amount of principal remaining on the loan. Crspannual updatecrsp compustat mergedfundamental annual miscellaneous items. The full data set consists of annual compustat data from 1971 to 2006 for publicly listed rms, excluding nancial rms and utilities. Book value of an asset is the value at which the asset is carried on a balance sheet and calculated by taking the cost of an asset minus the accumulated depreciation. Profitability is defined as the average ratio of ebitdata over the 3 years prior to issuance. The compustat database bank fundamentals annual and bank fundamentals quarterly databases also have the following items. I need this ratio for all the uk companies of last 15 year and i am not sure about which variables and method i should use for that. Finally, the ratio of cash ow to assets is measured as ebitda com. For return on assets we will use net income and end of year total assets. Valuegrowth file 7 compustat prices, dividends and earnings pde file 7 compustat prices, dividends and earnings pde research file 8. Appendix in this appendix, we present the construction of variables, data source, and some empirical procedures. Following are two possibilities if debt is not liquid.
To avoid outliers, i trim the observations that correspond to the top and bottom 0. We define debt issuance following hovakimian et al. My solution is to multiply the crsp market value with the last known ratio of compustat to crsp market value. Price is from crsp, shares outstanding are from compustat if available or crsp. Bm book to market ratio book values are from compustat and. Columns t, u and v list the following variables from the compustat database bkvlps, csho and ceql. The reference file of naics codes provides a source for the north american industry classification system naics codes and a textual description of each code included on the compustat business information segment naics file. The book value of debt is commonly used in liquidity ratios, where it is compared to either assets or cash flows to see if an organization is capable of supporting its debt load.
This paper documents how book value measurements of debt distort debtequity ratios and cost of capital calculations. Bm book to market ratio book values are from compustat and market value is from cec test121 at florida international university. Ratios, values and other instruments from the balance sheet. If the result is higher than one, thats a sign the company is carrying a large amount of debt. You find the book value of debt in the liabilities section of the balance sheet. The determinants of debt maturity and cash holdings. Book value of equity definition is from daniel and titman, appendix a market reactions to tangible and intangible information, jf 2006 ratio definitions are. Fama and french were professors at the university of chicago booth school of business, where fama still resides. On the relation between the markettobook ratio, growth. Balance sheet data are obtained from the standard and poors compustat database.
In 20, fama shared the nobel memorial prize in economic sciences. Dissertation chapter 1 how important is target leverage. Variables observations minimum maximum debt leverage 546 0. If not, we measure stockholders equity as the book value of common equity item. Since we are interested in computing roe for each industry over a number of years, we will need net income, the book value of equity, the sic industry code and the fiscal year.
For the markettobook ratio we need the number of shares outstanding, end of year stock price, and book value of equity. Consolidated companylevel market value is the sum of all issuelevel market values, including trading and nontrading issues. Lists of annual, quarterly and variable compustat north america data. Be is the book value of stockholders equity, plus balance sheet deferred. The question assumes that market value of debt and book value of debt are different. I am struggling to calculate market to book ratio tobins q from compustat. Lev leverage longterm debt dltt plus shortterm debt dlc divided by equity value, all items from compustat annual. Datastream compustat datatypes in red can be downloaded market value mkvalt north america database.
Forecasting corporate bond returns with a large set of. Estimating market value of equity with crsp and compustat. The dependent variables are tobins q, which is the log of one plus the ratio of market value of assets to book value of assets, and profit margin, which is net income divided by sales. Do religious norms influence corporate debt financing. Once you know the book value, divide the value of the debt by the assets. In calculating standard deviations for variables, i eliminate the firms with less than five years of frequency from the dataset. The market value of debt, market versus book value of debt. Corporate social responsibility, product market perception. Variable definition and data source variable definition and data source in the parenthesis bm booktomarket equity ratio, where book value of. The corporate leverage variables are total debt to market value of assets tdm, total debt to book value of assets tda, longterm debt to market value of assets ldm, and longterm debt to book value of assets lda. Crspannual updatecrsp compustat mergedfundamental annualsupplemental data items csho. Market value of equity plus book value of pref stock and debt divided by book value of total assets wc03451, wc03251, wc03051, wc02999 also see.
Be is the book value of stockholders equity, plus balance sheet deferred taxes and investment tax credit if available, minus the book value of preferred stock. The simplest way to estimate the market value of debt is to convert the book value of debt in market value of debt by assuming the total debt as a single coupon bond with a coupon equal to the value of interest expenses on the total debt and the maturity equal to the weighted average maturity of the debt. However, i could not separate the new matched group in a separate variable so i. Book value per share represents fiscal year end common equity liquidation value divided. Leverage and the booktoprice effect in stock returns ssrn papers. Long term debt market value of assets ldm ldm is the ratio. Item as a % of average longterm debt 23 item as a % of average total debt 23 item as a % of current assets 24 item as a % of intangibles 24 item as a % of total assets 24 item as a % of total debt 25 item as a % of total liabilities 25 item as a % of total liabilities and stockholders equity 26. Appendix unless otherwise noted, data are from the compustats. Expected growth in eps expected annual growth rate in eps over next five years regression beta beta from a regression or a bottom up beta. Company financials compustat data definitions june, 2008. Click on each variable for a more detailed explanation. How can we calculate market value of equity and book value. In asset pricing and portfolio management the famafrench threefactor model is a model designed by eugene fama and kenneth french to describe stock returns.
It includes notes payable, longterm debt and the current portion of long term debts. Compustatfundamentalsincome statement items interest on longterm debt uxintd uxintd. This amount the original loan amount net of the reduction in principal is the book value of debt. Stockholders equity is the value reported by moodys or compustat, if it is available. Understanding the compustat north america database 2. If not, we measure stockholders equity as the book value of common equity plus the par value of preferred stock, or the book value of assets minus total liabilities in that order. Book value of debt can be found in balance sheet i.
The importance of a market value measurement of debt in. Book value of assets at minus book value of common equity ceq plus the market value of. That can tell you if the company has borrowed too much to be a profitable investment. Second thing is that how can we calculate book value of total debt. Several screening variables are preselected to produce one record per gvkeydatadate pair, while keeping the vast majority of records. Compustatfundamentalsincome statement items equity book value bkvlps bkvlps. Book value can refer to a specific debt, or to the total net debt reported on a companys balance. Book equity is constructed from compustat data or collected from the moodys industrial, financial, and utilities manuals. Under the current financial reporting standards, companies may be required to measure their debts at fair value. Booktomarket, retained earnings, and earnings in the. The comprehensive compustat database provides company data going back 40. Why do we use the market value of debt and not the book. Examples of excluded rows include those with restated data, different views of the same data pro forma, prefasb. The importance of a marketvalue measurement of debt in.