Page 79 - Contributed Paper Session (CPS) - Volume 4

CPS2129 Matilde Bini et al.
Response variable is the Interest Coverage from 2008 to 2017, measured on a
continuous scale; it represents a short-term risk indicator. Time-varying
covariate is the Leverage which is the indicator of financial distress and it varies
across firms and time. Time-invariant covariates are Sector of Economic
Activity (Food and Tobacco, Textile and Leather, Wood, Publishing and Paper,
Refining, Chemistry and Rubber, Metallurgy and Steel industry, Electric
machines and Mechanical, Means of transport and Other industries and
maintenance as reference category); they vary across firms but not in time.
Distal outcome is the ROE 2017, which is an outcome of firms’ performance
that is predicted from the growth of Interest Coverage. Here following the
path diagram of the LGCM with ten repeated measures of the outcome
variable (Interest coverage: Int_cov), a time-varying covariate (Leverage: Lev),
the time invariant covariates (Sector of economic activity) and a distal outcome
(ROE 2017):

5. Result
Here below we show the results from the analysis performed by fitting a
LGCM. A set of alternative unconditional LGCMs with correlated measurement
errors between adjacent time point were first estimated (linear, quadratic,
Piecewise linear with 2 knots and latent basis), in order to identify the more
suitable functional form for the individual latent trajectories. Based on the
model goodness of fit the quadratic form LGCM was preferred (RMSEA=0.028,
CFI=0.980, TLI=0.976). The corresponding model parameters were estimated
by using the Full Information Maximum Likelihood (FIML; Arbuckle, 1996)
method with robust standard errors:

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