Table A1 Variable definitions Variable...

Table A1

Variable definitions

Variable	Description
Dependent variables
PEG	PEG is the implied cost of equity, estimated by the PEG model of Easton (2004) as follows $P E G = \sqrt{({e p s}_{2} - {e p s}_{1}) / P_{0}} \dots \dots \dots \dots \dots \dots \dots . .$ (4) where $P_{0} = the price per share at the current date; {e p s}_{1} = the expected accounting earnings at the next period ahead of the current date; {e p s}_{2}$ = the expected accounting earnings at two periods ahead of the current date
MPEG	MPEG is the implied cost of equity, estimated by the MPEG model of Easton (2004) as follows $M P E G = \sqrt{({e p s}_{2} + M P E G * {d p s}_{1} - {e p s}_{1}) / P_{0}} \dots \dots \dots \dots \dots \dots \dots$ (5) where ${d p s}_{1}$ = the expected dividend per share at the next period ahead of the current date. The other variables are defined above
OJN	Implied cost of equity, estimated by the modified Ohlson and Juettner-Nauroth (2005) model (modified by Gode and Mohanram, 2003)
Independent variables
ARL	The number of days between the end of a firm's fiscal year and the signature date on the audit report
ARL_Q4	A dummy variable coded one if the firm audit report lag belongs to the top quartile within the industry and year group, 0 otherwise
LNARL	The natural logarithm of the number of days between the end of a firm's fiscal year and the signature date on the audit report
EAL_Q4	The number of days between a firm's fiscal year-end and the preliminary earnings announcement date. A dummy variable coded one if the firm earnings report lag belongs to the top quartile within the industry and year group, 0 otherwise
LNEAL	Natural logarithm of the number of days between a firm's fiscal year-end and the earnings announcement date
ABNARL	Abnormal audit report lag is calculated as the difference between actual audit report lag and predicted audit report lag (section 5.1 discussed in detail)
Y_T_Y_ARL	Year-to-Year Audit Report Lag measures as ARL_t minus ARL_t−1
Control variables
LNSIZE	Natural logarithm of the total assets
LEV	Firm leverage is calculated as short-term debt plus long-term debt divided by total assets
BTM	Book-to-market ratio is calculated as the book value of equity divided by the market values of equity
SALEGR	Change in sales scaled by total assets
ZSCORE	Altman Z-score following Altman (1968) as Z = 0.012X₁ + 0.014X₂ + 0.033X₃ + 0.006X₄ + 0.999X₅ … … … (6) where X₁ = Working Capital/Total Assets; X₂ = Retained Earnings/Total Assets; X₃ = Earnings before Interest and Taxes/Total Assets; X₄ = Market Value of Equity/Book Value of Total Liabilities; X₅ = Sales/Total Assets; Z = Overall Index
ROA	Net income before extraordinary items divided by total assets
LOSS	An indicator variable is equal to one if the firm has negative earnings before interest and tax, and zero otherwise
BIGN	A dummy variable coded one if a Big4 audit firm audits a firm and 0 otherwise
BETA	A measure of systematic risk, extracted from Datastream. Datastream uses a 5-year period and regresses the share price against the respective Datastream total market index using log changes of the closing price on the first day of each month
OWNCON	The proportion of outstanding shares held by the large shareholders
BODMEET	Natural logarithm of board meeting frequencies
CEODUAL	A dummy variable coded 1 if the CEO is also the chairman of the board and zero otherwise
ICWEAK	An indicator variable is equal to one if the firm has internal control weakness, and zero otherwise
BODSIZE	Natural logarithm of the total number of board members
INDDIR	The proportion of independent directors on the board
GCOPIN	Dummy variable coded 1 if the firm had a qualified audit opinion, including going concern opinion, and 0 otherwise
RESTATE	A dummy variable is coded as 1 if the firm has reported financial restatement, otherwise 0
FYE	A dummy variable coded as 1 if the firm financial year ending is June and December, 0 otherwise
LNAFEE	Natural logarithm of audit fees plus 1
LNNAFEE	Natural logarithm of non-audit fees plus 1
REST_FUTURE	A dummy variable is assigned a value of 1 if a firm subsequently restates the current year's financial statement and 0 otherwise
BIDASK	Bid-ask spread (percentage) is the difference between the highest trader stock price and the lowest selling price of trader stock measured as: [(AskPrice – BidPrice)]/[(AskPrice + BidPrice)/2]

Variable	Description
Dependent variables
PEG	PEG is the implied cost of equity, estimated by the PEG model of Easton (2004) as follows $P E G = \sqrt{({e p s}_{2} - {e p s}_{1}) / P_{0}} \dots \dots \dots \dots \dots \dots \dots . .$ (4) where $P_{0} = the price per share at the current date; {e p s}_{1} = the expected accounting earnings at the next period ahead of the current date; {e p s}_{2}$ = the expected accounting earnings at two periods ahead of the current date
MPEG	MPEG is the implied cost of equity, estimated by the MPEG model of Easton (2004) as follows $M P E G = \sqrt{({e p s}_{2} + M P E G * {d p s}_{1} - {e p s}_{1}) / P_{0}} \dots \dots \dots \dots \dots \dots \dots$ (5) where ${d p s}_{1}$ = the expected dividend per share at the next period ahead of the current date. The other variables are defined above
OJN	Implied cost of equity, estimated by the modified Ohlson and Juettner-Nauroth (2005) model (modified by Gode and Mohanram, 2003)
Independent variables
ARL	The number of days between the end of a firm's fiscal year and the signature date on the audit report
ARL_Q4	A dummy variable coded one if the firm audit report lag belongs to the top quartile within the industry and year group, 0 otherwise
LNARL	The natural logarithm of the number of days between the end of a firm's fiscal year and the signature date on the audit report
EAL_Q4	The number of days between a firm's fiscal year-end and the preliminary earnings announcement date. A dummy variable coded one if the firm earnings report lag belongs to the top quartile within the industry and year group, 0 otherwise
LNEAL	Natural logarithm of the number of days between a firm's fiscal year-end and the earnings announcement date
ABNARL	Abnormal audit report lag is calculated as the difference between actual audit report lag and predicted audit report lag (section 5.1 discussed in detail)
Y_T_Y_ARL	Year-to-Year Audit Report Lag measures as ARL_t minus ARL_t−1
Control variables
LNSIZE	Natural logarithm of the total assets
LEV	Firm leverage is calculated as short-term debt plus long-term debt divided by total assets
BTM	Book-to-market ratio is calculated as the book value of equity divided by the market values of equity
SALEGR	Change in sales scaled by total assets
ZSCORE	Altman Z-score following Altman (1968) asZ = 0.012X₁ + 0.014X₂ + 0.033X₃ + 0.006X₄ + 0.999X₅ … … … (6) where X₁ = Working Capital/Total Assets; X₂ = Retained Earnings/Total Assets; X₃ = Earnings before Interest and Taxes/Total Assets; X₄ = Market Value of Equity/Book Value of Total Liabilities; X₅ = Sales/Total Assets; Z = Overall Index
ROA	Net income before extraordinary items divided by total assets
LOSS	An indicator variable is equal to one if the firm has negative earnings before interest and tax, and zero otherwise
BIGN	A dummy variable coded one if a Big4 audit firm audits a firm and 0 otherwise
BETA	A measure of systematic risk, extracted from Datastream. Datastream uses a 5-year period and regresses the share price against the respective Datastream total market index using log changes of the closing price on the first day of each month
OWNCON	The proportion of outstanding shares held by the large shareholders
BODMEET	Natural logarithm of board meeting frequencies
CEODUAL	A dummy variable coded 1 if the CEO is also the chairman of the board and zero otherwise
ICWEAK	An indicator variable is equal to one if the firm has internal control weakness, and zero otherwise
BODSIZE	Natural logarithm of the total number of board members
INDDIR	The proportion of independent directors on the board
GCOPIN	Dummy variable coded 1 if the firm had a qualified audit opinion, including going concern opinion, and 0 otherwise
RESTATE	A dummy variable is coded as 1 if the firm has reported financial restatement, otherwise 0
FYE	A dummy variable coded as 1 if the firm financial year ending is June and December, 0 otherwise
LNAFEE	Natural logarithm of audit fees plus 1
LNNAFEE	Natural logarithm of non-audit fees plus 1
REST_FUTURE	A dummy variable is assigned a value of 1 if a firm subsequently restates the current year's financial statement and 0 otherwise
BIDASK	Bid-ask spread (percentage) is the difference between the highest trader stock price and the lowest selling price of trader stock measured as: [(AskPrice – BidPrice)]/[(AskPrice + BidPrice)/2]

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