Variable measurement
| Definitions | |
|---|---|
| Variable of interests | |
| Trust_CEO | Composite measure of facial trustworthiness for CEOs, equals the average of the CEOs' standardized values of Eyebrow_Reverse, Face_Shape, Chin_Angle and Philtrum_Reverse. The standardized facial feature is computed as the facial feature minus the sample mean, scaled by the sample standard deviation |
| Chin_Angle | The angle of the chin. Details are in Hsieh et al. (2020) |
| Eyebrow_Reverse | The angles of both left- and right-side eyebrows and then averaging the two eyebrow angles, multiplied by −1. Detailed measurement is provided in Hsieh et al. (2020) |
| Face_Shape | The roundness of a face. Details are in Hsieh et al. (2020) |
| Philtrum_Reverse | The nose-to-lip distance scaled by the upper facial length, multiplied by −1. Details are in Hsieh et al. (2020) |
| Board monitoring structure | |
| Bd_Ind | Equals 1 if a majority (more than 50%) of directors on board are independent and 0 otherwise (source: BoardEx) |
| Bd_Female | The percentage of female directors on board (source: BoardEx) |
| Bd_Size | The total number of directors on board (source: BoardEx) |
| Bd_IntM | Equals 1 if a majority of independent directors serve on at least two of the three principal board committees (i.e. audit committee, nomination committee and compensation committee), and 0 otherwise (source: BoardEx) |
| Bd_RG | A proxy for the level of shareholder rights as measured by the Gompers-Ishii-Metric Governance Index (source: Institutional Shareholder Services) |
| Board monitoring activities | |
| Bd_Meet | Annual number of board meetings (source: Execucomp) |
| Moni_Meet | Product of the percentage of independent directors and the number of annual board meetings (source: Execucomp) |
| CEO incentive alignment | |
| CEO_Incent | Equals to ONEPCT/ONEPCT + SALARY + BONUS, where ONEPCT equals 0.01 × PRICE × (SHARES + OPTIONS). PRICE is the company share price, SHARES is the number of shares held by the CEO and OPTIONS is the number of options held by the CEO (source: Execucomp) |
| CEO_Owner | Percent of firm's shares held by the CEO (source: Execucomp) |
| Control variables | |
| Firmsize | Natural log of total assets at the beginning of the misstatement period (source: Compustat) |
| Bus_Seg | Number of active business segments for which a firm reports operations (source: Compustat) |
| ROE | Return on equity for the year prior to the restatement, calculated as operating income before interest and taxes divided by total equity (source: Compustat) |
| Return | The cumulative stock return in the preceding year (source: CRSP) |
| BigN | Indicator that equals one if a firm uses one of the Big N auditors and zero otherwise (source: Audit Analytic) |
| BM | Book value of equity/market value of equity (source: Compustat) |
| Leverage | Total liabilities divided by total assets (source: Compustat) |
| Firm_Age | Number of years since the firm was first listed on CRSP (source: CRSP) |
| RD | R&D expenditures/Total assets (if missing, set to zero) (source: Compustat) |
| Return_Std | Standard deviation of daily stock returns the 12 months in the preceding fiscal year (source: CRSP) |
| Insti_Owner | 1 if the firm received a SOX 404 audit opinion from Deloitte, PricewaterhouseCoopers, Ernst & Young, or KPMG during the misstatement period and 0 otherwise (source: Audit Analytics) |
| CEO_Overconf | Dummy variable, equals 1 if the CEO is overconfident according to the Hold67 measurement in prior studies (Hribar & Yang, 2016) and 0 otherwise (source: Execucomp) |
| CEO_Age | CEO's age (source: Execucomp) |
| CEO_Female | 1 if the CEO is female, and 0 otherwise (source: BoardEx) |
| CEO_Tenure | Number of years that the CEO has served as CEO (source: BoardEx) |
| Definitions | |
|---|---|
| Trust_CEO | Composite measure of facial trustworthiness for CEOs, equals the average of the CEOs' standardized values of |
| Chin_Angle | The angle of the chin. Details are in |
| Eyebrow_Reverse | The angles of both left- and right-side eyebrows and then averaging the two eyebrow angles, multiplied by −1. Detailed measurement is provided in |
| Face_Shape | The roundness of a face. Details are in |
| Philtrum_Reverse | The nose-to-lip distance scaled by the upper facial length, multiplied by −1. Details are in |
| Bd_Ind | Equals 1 if a majority (more than 50%) of directors on board are independent and 0 otherwise (source: BoardEx) |
| Bd_Female | The percentage of female directors on board (source: BoardEx) |
| Bd_Size | The total number of directors on board (source: BoardEx) |
| Bd_IntM | Equals 1 if a majority of independent directors serve on at least two of the three principal board committees (i.e. audit committee, nomination committee and compensation committee), and 0 otherwise (source: BoardEx) |
| Bd_RG | A proxy for the level of shareholder rights as measured by the Gompers-Ishii-Metric Governance Index (source: Institutional Shareholder Services) |
| Bd_Meet | Annual number of board meetings (source: Execucomp) |
| Moni_Meet | Product of the percentage of independent directors and the number of annual board meetings (source: Execucomp) |
| CEO_Incent | Equals to ONEPCT/ONEPCT + SALARY + BONUS, where ONEPCT equals 0.01 × PRICE × (SHARES + OPTIONS). PRICE is the company share price, SHARES is the number of shares held by the CEO and OPTIONS is the number of options held by the CEO (source: Execucomp) |
| CEO_Owner | Percent of firm's shares held by the CEO (source: Execucomp) |
| Firmsize | Natural log of total assets at the beginning of the misstatement period (source: Compustat) |
| Bus_Seg | Number of active business segments for which a firm reports operations (source: Compustat) |
| ROE | Return on equity for the year prior to the restatement, calculated as operating income before interest and taxes divided by total equity (source: Compustat) |
| Return | The cumulative stock return in the preceding year (source: CRSP) |
| BigN | Indicator that equals one if a firm uses one of the Big N auditors and zero otherwise (source: Audit Analytic) |
| BM | Book value of equity/market value of equity (source: Compustat) |
| Leverage | Total liabilities divided by total assets (source: Compustat) |
| Firm_Age | Number of years since the firm was first listed on CRSP (source: CRSP) |
| RD | R&D expenditures/Total assets (if missing, set to zero) (source: Compustat) |
| Return_Std | Standard deviation of daily stock returns the 12 months in the preceding fiscal year (source: CRSP) |
| Insti_Owner | 1 if the firm received a SOX 404 audit opinion from Deloitte, PricewaterhouseCoopers, Ernst & Young, or KPMG during the misstatement period and 0 otherwise (source: Audit Analytics) |
| CEO_Overconf | Dummy variable, equals 1 if the CEO is overconfident according to the Hold67 measurement in prior studies ( |
| CEO_Age | CEO's age (source: Execucomp) |
| CEO_Female | 1 if the CEO is female, and 0 otherwise (source: BoardEx) |
| CEO_Tenure | Number of years that the CEO has served as CEO (source: BoardEx) |
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