Table A1. Variable definitions Dependent...

Table A1.

Variable definitions


Dependent variable
SPCR	= The future stock price crash risk, calculated using four metrics to capture various dimensions of volatility and negative return extremity: NCSKEW: Measures the negative skewness of firm-specific weekly returns, indicating frequent and severe negative returns compared to positive ones. DUVOL: Captures the log ratio of the standard deviations of down-week to up-week firm-specific returns, highlighting volatility asymmetry. CRASH: An indicator set to 1 if a firm experiences extreme negative weekly returns that fall more than 3.09 standard deviations below the mean, indicating the occurrence of crash events. COUNT: Quantifies the net count of extreme negative returns exceeding 3.09 standard deviations below the mean versus extreme positive returns, offering a direct measure of the frequency of negative shocks.
Main independent variables
LP_QUALITY	= 1 minus the failure rate of the lead partner. The audit failure rate is calculated by dividing the number of type 2 failures (number of annual reports restated following a clean audit opinion) by the total number of annual reports signed by the lead audit partner
RP_QUALITY	= 1 minus the failure rate of the review partner. The audit failure rate is calculated by dividing the number of type 2 failures (number of annual reports restated following a clean audit opinion) by the total number of annual reports signed by the review audit partner
Control variables
LP_GENDER	= 1 if the lead audit partner is a woman otherwise 0
RP_GENDER	= 1 if the reviewer audit partner is a woman otherwise 0
LP_INDEXPERIENCE	= The lead audit partner’s market share of sales within a particular industry
RP_INDEXPERIENCE	= The review audit partner’s market share of sales within a particular industry
LP_WORKLOAD	= The number of public client firms a lead audit partner handles
RP_WORKLOAD	= The number of public client firms a review audit partner handles
LP_CI	= Economic importance of a client for the lead audit partner. The ratio of the client’s sales to the auditor’s total audited sales from all clients
RP_CI	= Economic importance of a client for the review audit partner. The ratio of the client’s sales to the auditor’s total audited sales from all clients
AUDTYPE	= 1 if the client’s firm has audited by state auditor otherwise 0
LNAUDDELAY	= The natural logarithm of days between the fiscal year-end date and the audit report date
AUDTEN	= Number of years that the client firm retains the auditor
OPNINT	= The number of paragraphs in a qualified audit opinion
ACEXST	= If the firm has the audit committee 1 and otherwise 0
BDSIZE	= The total number of board members
LAGNCSKEW	= lagged NCSKEW
BETA	= Market risk measured by equity beta
DEBTRATIO	= Debt_to_equity ratio computed as total liabilities divided by total equity
SIZE	= Natural logarithm of total assets
ROA	= Operating income divided by total assets
AGE	= Firm age, the natural log of the number of years since the firm gets listed in the stock market
LEVERAGE	= Total liabilities divided by total assets
MB	= Market-to-book ratio is the market value of equity divided by the book value of equity
ZMJSCORE	= Financial risk scores to measure bankruptcy probability, calculated as _4.803 _ 3.6 * (net income/total assets) + 5.4 * (total debt/total assets) _ 0.1 * (current assets/current liabilities) at the fiscal year-end
Additional variables
INSIDER	= The stock ownership of managers
(Continued next page) (continued)	= Principal component analysis to extract a factor index (IOS) from Four singular variables: MBVE: indicates the market-to-book value of equity ratio. MBVA: designates the market-to-book value of assets ratio. RISK1: a proxy for the risk of operations, equal to the standard deviation, over the last four fiscal years of the yearly change in operating income scaled by total assets at the beginning of the period. RISK2: a proxy for total risk, defined by the standard deviation over the last four fiscal years of the return on the market value of the firm.
SOE	= Percentage of ownership held by the state
\|DA\|	= Absolute value of discretionary accruals estimated using the modified Jones model; lower values indicate higher audit quality
MODOPIN	= Indicator variable equal to 1 if the audit report contains a qualified or adverse opinion and 0 otherwise; higher values indicate stricter auditor judgment and reporting integrity
AVE_LP_QUALITY	= The average quality of lead partners across other firms in the same industry, used as an instrumental variable for the quality of the lead partner at the focal firm
AVE_RP_QUALITY	= The average quality of review partners across other firms in the same industry, used as an instrumental variable for the quality of the review partner at the focal firm
PRED_LP_QUALITY	= The predicted value of lead partner quality derived from the first stage of the 2SLS model, using industry average quality as the instrumental variable
PRED_RP_QUALITY	= The predicted value of review partner quality derived from the first stage of the 2SLS model, using industry average quality as the instrumental variable


Dependent variable
SPCR	= The future stock price crash risk, calculated using four metrics to capture various dimensions of volatility and negative return extremity: NCSKEW: Measures the negative skewness of firm-specific weekly returns, indicating frequent and severe negative returns compared to positive ones. DUVOL: Captures the log ratio of the standard deviations of down-week to up-week firm-specific returns, highlighting volatility asymmetry. CRASH: An indicator set to 1 if a firm experiences extreme negative weekly returns that fall more than 3.09 standard deviations below the mean, indicating the occurrence of crash events. COUNT: Quantifies the net count of extreme negative returns exceeding 3.09 standard deviations below the mean versus extreme positive returns, offering a direct measure of the frequency of negative shocks.
Main independent variables
LP_QUALITY	= 1 minus the failure rate of the lead partner. The audit failure rate is calculated by dividing the number of type 2 failures (number of annual reports restated following a clean audit opinion) by the total number of annual reports signed by the lead audit partner
RP_QUALITY	= 1 minus the failure rate of the review partner. The audit failure rate is calculated by dividing the number of type 2 failures (number of annual reports restated following a clean audit opinion) by the total number of annual reports signed by the review audit partner
Control variables
LP_GENDER	= 1 if the lead audit partner is a woman otherwise 0
RP_GENDER	= 1 if the reviewer audit partner is a woman otherwise 0
LP_INDEXPERIENCE	= The lead audit partner’s market share of sales within a particular industry
RP_INDEXPERIENCE	= The review audit partner’s market share of sales within a particular industry
LP_WORKLOAD	= The number of public client firms a lead audit partner handles
RP_WORKLOAD	= The number of public client firms a review audit partner handles
LP_CI	= Economic importance of a client for the lead audit partner. The ratio of the client’s sales to the auditor’s total audited sales from all clients
RP_CI	= Economic importance of a client for the review audit partner. The ratio of the client’s sales to the auditor’s total audited sales from all clients
AUDTYPE	= 1 if the client’s firm has audited by state auditor otherwise 0
LNAUDDELAY	= The natural logarithm of days between the fiscal year-end date and the audit report date
AUDTEN	= Number of years that the client firm retains the auditor
OPNINT	= The number of paragraphs in a qualified audit opinion
ACEXST	= If the firm has the audit committee 1 and otherwise 0
BDSIZE	= The total number of board members
LAGNCSKEW	= lagged NCSKEW
BETA	= Market risk measured by equity beta
DEBTRATIO	= Debt_to_equity ratio computed as total liabilities divided by total equity
SIZE	= Natural logarithm of total assets
ROA	= Operating income divided by total assets
AGE	= Firm age, the natural log of the number of years since the firm gets listed in the stock market
LEVERAGE	= Total liabilities divided by total assets
MB	= Market-to-book ratio is the market value of equity divided by the book value of equity
ZMJSCORE	= Financial risk scores to measure bankruptcy probability, calculated as _4.803 _ 3.6 * (net income/total assets) + 5.4 * (total debt/total assets) _ 0.1 * (current assets/current liabilities) at the fiscal year-end
Additional variables
INSIDER	= The stock ownership of managers
(Continued next page) (continued)	= Principal component analysis to extract a factor index (IOS) from Four singular variables: MBVE: indicates the market-to-book value of equity ratio. MBVA: designates the market-to-book value of assets ratio. RISK1: a proxy for the risk of operations, equal to the standard deviation, over the last four fiscal years of the yearly change in operating income scaled by total assets at the beginning of the period. RISK2: a proxy for total risk, defined by the standard deviation over the last four fiscal years of the return on the market value of the firm.
SOE	= Percentage of ownership held by the state
\|DA\|	= Absolute value of discretionary accruals estimated using the modified Jones model; lower values indicate higher audit quality
MODOPIN	= Indicator variable equal to 1 if the audit report contains a qualified or adverse opinion and 0 otherwise; higher values indicate stricter auditor judgment and reporting integrity
AVE_LP_QUALITY	= The average quality of lead partners across other firms in the same industry, used as an instrumental variable for the quality of the lead partner at the focal firm
AVE_RP_QUALITY	= The average quality of review partners across other firms in the same industry, used as an instrumental variable for the quality of the review partner at the focal firm
PRED_LP_QUALITY	= The predicted value of lead partner quality derived from the first stage of the 2SLS model, using industry average quality as the instrumental variable
PRED_RP_QUALITY	= The predicted value of review partner quality derived from the first stage of the 2SLS model, using industry average quality as the instrumental variable

Source(s): Authors’ own work

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