Graham (1996a) argues that this measure of new financing is better than the first difference in debt ratio, as when there is no change in total liabilities but there is a change in total assets, our measure of new debt financing still correctly measures the zero change (but the first difference in debt ratio does not).
More importantly, it is the level of property insurance that matters in debt financing decisions rather than the change in property insurance.
(26) Using the estimated regression coefficient of lagged INS, the estimated mean increase in debt ratio is 0.94%, the mean annual tax saving attributable to more debt financing is 2.84 million yuan, and this savings contributes 0.12% to firm value (in the manner of computing Q 1).