Table 9 Variable Definitions
From: Double trouble? IRS’s attention to financial accounting restatements
ABV AVE ATENTION | An indicator variable set equal to one if ATTENTION in year t is greater than the average three-month downloads of year t-1. |
ATTENTION | The amount of IRS downloads for the three-month window following a restatement in the restatement year and in all other firm-years. |
BIG R | An indicator variable equal to one if the company issues a 4.02 8-K revision, zero otherwise. |
BTD | Pretax income (PI) minus current domestic and foreign tax expense (TXFED + TXFO) grossed up by 35%, scaled by assets (AT). |
CAPITAL INTENSITY | Net property, plant, and equipment (PPENT) divided by lagged total assets (AT). |
CASH | Cash holdings (CH) scaled by lagged total assets (AT). |
CASH ETR | Taxes paid (TXPD) divided by pretax book income net of special items (PI-SPI). |
DTA | Net deferred tax assets (TXNDBA) scaled by total assets (AT). |
DTL | Net deferred tax liabilities (TXNDBL) scaled by total assets (AT). |
ERRORS | An indicator variable set equal to one in which a restatement is attributable to an error and zero otherwise. |
F-SCORE | We first calculate the predicted value (PV) of an accounting misstatement following model 1 of Panel A of Table 7 of Dechow et al. (2011). The probability of misstatement is then calculated as PR = e^{PV}/(1 + e^{PV}). Finally, F-SCORE =PR/0.0037. |
FORMS | The total number of new filings for firm i of month m available for download on EDGAR. |
FRAUD | An indicator variable set equal to one during the restatement windows attributable to fraud and zero otherwise. |
GAAP ETR | Total tax expense (TXT) divided by pretax book income net of special items (PI-SPI). |
ICW | An indicator variable set equal to one for firm-year observations that disclose a material weakness and zero otherwise. |
ICW TOTAL | The total number of material weakness disclosed by a firm for a given firm-year observation. |
INTANGIBLE INTENSITY | Intangible assets (INTAN) divided by lagged total assets (AT); missing values set equal to zero. |
INVENTORY INTENSITY | Inventory (INVT) divided by lagged total assets (AT). |
IRS AUDIT REF | An indicator equal to one if the firm referred to a tax audit in its 10-K and zero otherwise |
IRS DOWNLOAD BREADTH | The number of downloads of unique accession numbers by IP addresses belonging to the IRS during month m of year t for firm i. |
IRS DOWNLOAD TYPE | The number of downloads of the different form types by IP addresses belonging to the IRS during month m of year t for firm i. |
IRS DOWNLOADS | The total number of downloads made by IP addresses belonging to the IRS during month m of year t for firm i. |
LENGTH | Measured as the length of time it takes the IRS to download one public filing of a restating firm following a press release or media article covering the restatement |
LEV | Long-term debt (DLTT) divided by lagged total assets (AT). |
MTB | Number of shares outstanding at the end of the year multiplied by the price per share at year end divided by book value of equity (PRCC_F*CSHO/CEQ). |
MNE | An indicator variable set equal to one if a firm is not missing pre-tax foreign income (PIFO), indicating a multinational firm. |
NOL CHANGE | Change in the tax loss carryforward (TLCF) divided by total assets (AT). |
R&D INTENSITY | R&D expense (XRD) divided by sales (SALE); missing values set equal to zero. |
RESTATE | An indicator variable equal to one for all firm-month or firm-year observations with a restatement and zero otherwise. |
ROA | Pretax book income (PI) divided by total assets (AT). |
SALES GROWTH | The change is sales (SALE) scaled by the prior year. |
SETTLE | Measured as the aggregate amount of settlements made by a firm from years t + 1 to t + 4 and to t + 5 scaled by year end UTBs (TXTUBEN). |
SIZE | The log of total assets (AT) as of the end of the year. |
SPEED | Measured as the number of days it takes the IRS to download the form announcing a restatement. |
UTB | Year-end UTBs (TXTUBEN) divided by total assets (AT). |
10-K | An indicator variable equal to one if a 10-K is released during the month. |
10-Q | An indicator variable equal to one if a 10-Q is released during the month. |
FORMS | The total number of new forms available for download for firm i during each month m over our entire sample period. |