Table A1. Variable definition Variables...

Table A1.

Variable definition

Variables	Definition
Dependent variables
SMTH	Proxy for income smoothing, and calculated as the common factor of SMTH1, SMTH2, SMTH3
SMTH1	The standard deviation of operating earnings (OIADP) divided by the standard deviation of cash flows from operations (OANCF), with both earnings and cash flows scaled by lagged total assets. The standard deviation is computed over at least three of the five most recent years, and the measure is multiplied by −1 for ease of interpretation
SMTH2	The Spearman correlation between the change in total accruals (IB – OANCF) and the change in cash flows from operations (OANCF), with both measures scaled by lagged total assets. The correlation is computed over at least three of the past five years. For ease of interpretation, the measure is multiplied by −1
SMTH3	The Spearman correlation between changes in discretionary accruals and changes in pre-managed income. Discretionary accruals are estimated using the cross-sectional Jones (1991) model, while pre-managed income is defined as net income minus discretionary accruals. The correlation is calculated over at least three of the past five years. For ease of interpretation, the measure is multiplied by −1
CFO_t	Operating cash flows (OANCF) for year t, deflated by lagged total assets
Independent variables
Variable(s) of interest
MILITARY_CEO	An indicator variable that equals one if the CEO of the firm in a given year has prior military experience, and zero otherwise
Control variables
MA_SCORE	Managerial ability ranking developed by Demerjian et al (2012)
FIRM_SIZE	Natural log of market value of equity
LEV	Financial leverage, defined as total liabilities (LT) divided by total assets (AT)
BM	Book-to-market ratio, defined as the natural log of book value of equity (CEQ) divided by market value of equity (PRCC_F × CSHO)
SALE_VOL	The standard deviation of sales (SALE) scaled by lagged total assets (AT), over at least three of the last five years (t4,t)
LOSS_PCT	The proportion of years in which a firm reports negative net income (IB), defined as having losses in at least three out of the five most recent fiscal years (t – 4 through t)
OP_CYCLE	The natural logarithm of the firm’s operating cycle, calculated as (Sales ÷ 360)÷(average accounts receivable, RECT) + (COGS ÷ 360)÷(average inventory, INVT), and averaged over at least three of the five most recent fiscal years (t – 4 through t)
SALES_GROWTH	Sales growth, the annual change in revenues defined as (Sales_t − Sales_{t − 1})/Sales_{t − 1}
OP_LEV	Net property, plant and equipment (PPENT) divided by total assets (AT)
AVG_CFO	Average operating cash flow. Average cash flows from operations (OANCF) scaled by lagged total assets, measured over the last five years (t4,t)
X_t	Earnings per share (EPS) for year t
X_t3	The cumulative EPS from years t + 1 through t + 3
R_t	The ex-dividend annual stock return for year t
R_t3	The annually compounded stock return from year t + 1 to t + 3
E_t	Income before extraordinary items (IB) for year t, deflated by lagged total assets
birth_year_ceo	CEO’s birth year

Variables	Definition
Dependent variables
SMTH	Proxy for income smoothing, and calculated as the common factor of SMTH1, SMTH2, SMTH3
SMTH1	The standard deviation of operating earnings (OIADP) divided by the standard deviation of cash flows from operations (OANCF), with both earnings and cash flows scaled by lagged total assets. The standard deviation is computed over at least three of the five most recent years, and the measure is multiplied by −1 for ease of interpretation
SMTH2	The Spearman correlation between the change in total accruals (IB – OANCF) and the change in cash flows from operations (OANCF), with both measures scaled by lagged total assets. The correlation is computed over at least three of the past five years. For ease of interpretation, the measure is multiplied by −1
SMTH3	The Spearman correlation between changes in discretionary accruals and changes in pre-managed income. Discretionary accruals are estimated using the cross-sectional Jones (1991) model, while pre-managed income is defined as net income minus discretionary accruals. The correlation is calculated over at least three of the past five years. For ease of interpretation, the measure is multiplied by −1
CFO_t	Operating cash flows (OANCF) for year t, deflated by lagged total assets
Independent variables
Variable(s) of interest
MILITARY_CEO	An indicator variable that equals one if the CEO of the firm in a given year has prior military experience, and zero otherwise
Control variables
MA_SCORE	Managerial ability ranking developed by Demerjian et al (2012)
FIRM_SIZE	Natural log of market value of equity
LEV	Financial leverage, defined as total liabilities (LT) divided by total assets (AT)
BM	Book-to-market ratio, defined as the natural log of book value of equity (CEQ) divided by market value of equity (PRCC_F × CSHO)
SALE_VOL	The standard deviation of sales (SALE) scaled by lagged total assets (AT), over at least three of the last five years (t4,t)
LOSS_PCT	The proportion of years in which a firm reports negative net income (IB), defined as having losses in at least three out of the five most recent fiscal years (t – 4 through t)
OP_CYCLE	The natural logarithm of the firm’s operating cycle, calculated as (Sales ÷ 360)÷(average accounts receivable, RECT) + (COGS ÷ 360)÷(average inventory, INVT), and averaged over at least three of the five most recent fiscal years (t – 4 through t)
SALES_GROWTH	Sales growth, the annual change in revenues defined as (Sales_t − Sales_{t − 1})/Sales_{t − 1}
OP_LEV	Net property, plant and equipment (PPENT) divided by total assets (AT)
AVG_CFO	Average operating cash flow. Average cash flows from operations (OANCF) scaled by lagged total assets, measured over the last five years (t4,t)
X_t	Earnings per share (EPS) for year t
X_t3	The cumulative EPS from years t + 1 through t + 3
R_t	The ex-dividend annual stock return for year t
R_t3	The annually compounded stock return from year t + 1 to t + 3
E_t	Income before extraordinary items (IB) for year t, deflated by lagged total assets
birth_year_ceo	CEO’s birth year

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