Measuring financial constraints in an US Sample
Posted: 03 March 2016 03:24 PM   [ Ignore ]
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Hello there,
i’m a complete newbie to WRDS/Compustat and glad i found this forum and can maybe get some help from here.

Im working on a project where i measure potential financial constraints in US companys in a sample from 2000-2015 with fundamental Data from Compustat.
As proxies for financial constraints i use firm size, firm age, leverage, dividends (yes/no variable), credit ratings (yes/no variable) and cash-to cash flow sensitivities.

firm size: i plan on using total assets (AT) as the variable

firm age: prcc_c /prcc_f and looking for the first year with data (as explained in other topics here). Or Is there any easier way to gain this info so that i only have to  
                                                                                                download data from the year 2000 onwards?

dividends: only using it as a yes/no (0/1) variable via DVT- dividends total

credit rating: would like to use it as a yes/no (0/1) variable, same like dividends , but no idea if there’s any code/variable that i can use?!

cash-to cash flow sensitivities: most complex . refers to the model of Almeida et al (2004), which predicts that constrained firms behavior towards Cash Holdings (CH-Cash/ total assets) increases with the rise of Cash Flow ( how to measure Cash Flow / increase in Cash Flow?)

Every suggestion and help on the whole topic is greatly appreciated.
Tim

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Posted: 05 March 2016 05:16 PM   [ Ignore ]   [ # 1 ]
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hi Tim,

Firm age could also be proxied by field year1 in Compustat Names
https://wrds-web.wharton.upenn.edu/wrds//tools/variable.cfm?library_id=129&file_id=65815

Probably the drawback would be that accounting data will be availble from the prospectus, where the first year is probably on the fiscal year a few years before the IPO.

Credit ratings: Company S&P Credit Ratings (ADSPRATE) (I haven’t used this before): https://wrds-web.wharton.upenn.edu/wrds//tools/variable.cfm?library_id=129&file_id=65975

Cash and cash flow measures should be easy to find in Compustat Funda.

Best,

Joost

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