Variable definitions
| Definition | |
|---|---|
| Test variables | |
| Affiliated alumni | Equals to 1 if, based on BoardEx biographies, at least one of the audit committee members is a CPA with an employment history at the incumbent audit firm, zero otherwise |
| Unaffiliated alumni | Equals to 1 if, based on BoardEx biographies, at least one of the audit committee members is a CPA with an employment history at an audit firm other than the incumbent audit firm, zero otherwise |
| Affiliated alumni chair | Equals to 1 if, based on BoardEx biographies, the audit committee chair is Affiliated alumni, zero otherwise |
| Unaffiliated alumni chair | Equals to 1 if, based on BoardEx biographies, the audit committee chair is Unaffiliated alumni, zero otherwise |
| Dependent variables | |
| Log of audit fees | Log of audit fees in dollars |
| Log of non-audit fees | Log of non-audit fees dollars |
| The ratio of nonaudit fees to total fees | Non-audit fees divided by total fees |
| Control variables | * |
| Financial expert | Equals to 1 if, based on BoardEx biographies, at least one of the audit committee members, who is not alumni or accounting expert, is a bank designated financial expert, 0 otherwise |
| Accounting expert | Equals to 1 if, based on BoardEx biographies, at least one of the audit committee members, who is not alumni is an accounting financial expert, 0 otherwise |
| Financial expert chair | Equals to 1 if, based on BoardEx biographies, the audit committee chair, who is not alumni or accounting financial expert, is a bank designated financial expert, 0 otherwise |
| Accounting expert chair | Equals to 1 if, based on BoardEx biographies, the audit committee chair, who is not alumni, is an accounting financial expert, 0 otherwise |
| CEO/chair duality | Equals to 1 if the CEO also serves as the board chair, 0 otherwise |
| CEO is CPA | Equals to 1 if the CEO is a CPA, 0 otherwise |
| CFO is CPA | Equals to 1 if the CFO is a CPA, 0 otherwise |
| CFO affiliated with the auditor | Equals to 1 if the CFO was previously affiliated with the incumbent audit firm, 0 otherwise |
| Log of boardsize | Log of the number of members on the board of directors |
| Board independence | Proportion of board members that are independent |
| Log of AC size | Log of the number of members on the audit committee |
| Proportion of women on AC | Number of women divided by audit committee size |
| Log of total assets | Log of total assets in thousands of dollars |
| Change in assets | Change in assets from t − 1 to t − 0 divided by lagged assets |
| Impaired loans | Impaired loans divided by lagged total assets |
| Tier1 ratio | Tier 1 capital ratio |
| Commercial loans | Commercial loans divided by lagged assets |
| Consumer loans | Consumer loans divided by lagged assets |
| Real-estate loans | Real-estate loans divided by lagged assets |
| Other loans | Other loans divided by lagged assets |
| Return on average assets | Return on three-year average total assets |
| Big 4 audit firm | Equals to 1 if the audit firm is one of the four largest audit firms, 0 otherwise |
| Auditor change | Equals to 1 if the bank has changed the auditor from t − 1 to t − 0, 0 otherwise |
| M&A or restructuring | Equals to 1 if the bank is engaged in a merger or acquisition based on the Audit Analytics internal control data indicating exemptions to the internal control assessment or if the bank reported restructuring charges, 0 otherwise |
| Material weakness | Equals to 1 if the bank has material weaknesses in the internal controls, 0 otherwise |
| Restatement | Equals to 1 if the bank has issued a restatement, 0 otherwise |
| Bank type | Indicator variables for National Commercial Banks (SIC 6021), State Commercial Banks (SIC 6022), Other Commercial Banks (SIC 6029) and Federally Chartered Savings Institutions (SIC6035) |
| Definition | |
|---|---|
| Affiliated alumni | Equals to 1 if, based on BoardEx biographies, at least one of the audit committee members is a CPA with an employment history at the incumbent audit firm, zero otherwise |
| Unaffiliated alumni | Equals to 1 if, based on BoardEx biographies, at least one of the audit committee members is a CPA with an employment history at an audit firm other than the incumbent audit firm, zero otherwise |
| Affiliated alumni chair | Equals to 1 if, based on BoardEx biographies, the audit committee chair is |
| Unaffiliated alumni chair | Equals to 1 if, based on BoardEx biographies, the audit committee chair is |
| Log of audit fees | Log of audit fees in dollars |
| Log of non-audit fees | Log of non-audit fees dollars |
| The ratio of nonaudit fees to total fees | Non-audit fees divided by total fees |
| * | |
| Financial expert | Equals to 1 if, based on BoardEx biographies, at least one of the audit committee members, who is not alumni or accounting expert, is a bank designated financial expert, 0 otherwise |
| Accounting expert | Equals to 1 if, based on BoardEx biographies, at least one of the audit committee members, who is not alumni is an accounting financial expert, 0 otherwise |
| Financial expert chair | Equals to 1 if, based on BoardEx biographies, the audit committee chair, who is not alumni or accounting financial expert, is a bank designated financial expert, 0 otherwise |
| Accounting expert chair | Equals to 1 if, based on BoardEx biographies, the audit committee chair, who is not alumni, is an accounting financial expert, 0 otherwise |
| CEO/chair duality | Equals to 1 if the CEO also serves as the board chair, 0 otherwise |
| CEO is CPA | Equals to 1 if the CEO is a CPA, 0 otherwise |
| CFO is CPA | Equals to 1 if the CFO is a CPA, 0 otherwise |
| CFO affiliated with the auditor | Equals to 1 if the CFO was previously affiliated with the incumbent audit firm, 0 otherwise |
| Log of boardsize | Log of the number of members on the board of directors |
| Board independence | Proportion of board members that are independent |
| Log of AC size | Log of the number of members on the audit committee |
| Proportion of women on AC | Number of women divided by audit committee size |
| Log of total assets | Log of total assets in thousands of dollars |
| Change in assets | Change in assets from |
| Impaired loans | Impaired loans divided by lagged total assets |
| Tier1 ratio | Tier 1 capital ratio |
| Commercial loans | Commercial loans divided by lagged assets |
| Consumer loans | Consumer loans divided by lagged assets |
| Real-estate loans | Real-estate loans divided by lagged assets |
| Other loans | Other loans divided by lagged assets |
| Return on average assets | Return on three-year average total assets |
| Big 4 audit firm | Equals to 1 if the audit firm is one of the four largest audit firms, 0 otherwise |
| Auditor change | Equals to 1 if the bank has changed the auditor from |
| M&A or restructuring | Equals to 1 if the bank is engaged in a merger or acquisition based on the Audit Analytics internal control data indicating exemptions to the internal control assessment or if the bank reported restructuring charges, 0 otherwise |
| Material weakness | Equals to 1 if the bank has material weaknesses in the internal controls, 0 otherwise |
| Restatement | Equals to 1 if the bank has issued a restatement, 0 otherwise |
| Bank type | Indicator variables for National Commercial Banks (SIC 6021), State Commercial Banks (SIC 6022), Other Commercial Banks (SIC 6029) and Federally Chartered Savings Institutions (SIC6035) |
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