Variable definitions
| Variable name | Source | How we measure |
|---|---|---|
| Dependent variables | ||
| ABSAWCA | Derived value | Absolute value of abnormal working capital accruals (AWCA) |
| ABSDTA | Derived value | The absolute value of residuals from Equation (2) |
| Independent variables | ||
| Subs | CMIE Prowess | Indicator variable for subsidiary firms |
| Moderating variables | ||
| Big 4 | CMIE Prowess | Indicator variable if the parent firm is audited by any subsidiaries of big 4/5 audit firms. Some of the Indian subsidiaries of Big 4/5 include C. C. Chokshi & Co. (Deloitte), BSR & Co. (KPMG), S.R. Batliboi & Co (E&Y), S.R. Batliboi & Co (Grant Thornton) etc. |
| BTD | CMIE Prowess | Book tax difference defined as Pre-tax income – (Current tax expense/Statutory tax rate), scaled by lagged total assets |
| Parent_Size | CMIE Prowess | The indicator variable for total assets of the parent company relative to the subsidiary is in the upper quartile and zero otherwise |
| Control variables | ||
| Capneed | CMIE Prowess | Percentage change in equity shares, preference shares and long-term debt in the following year |
| Growth | CMIE Prowess | Growth in total assets |
| Growth_sales | CMIE Prowess | Growth in total revenue |
| Inv | CMIE Prowess | Ratio of inventory to total assets |
| Lev | CMIE Prowess | Total borrowings scaled by total assets |
| Loss | CMIE Prowess | Cumulative percentage of sample years with reported losses by the firm |
| ROE | CMIE Prowess | Return on equity |
| Size | CMIE Prowess | Natural log of total assets |
| Std_ROA | CMIE Prowess | Standard deviation of return on assets calculated at the firm level over the sample period for firms with a minimum of three annual observations |
| Other variables used in the study | ||
| Acc | Derived value | Total accruals measured as (ΔNon-cash current assets-ΔCurrent liabilities)-Depreciation scaled by lagged total assets |
| Age | CMIE Prowess | Years since incorporation (Natural log) |
| AWCA | Derived value | Abnormal working capital accruals from Equation (1) |
| PPE | CMIE Prowess | Plant, property and equipment scaled by lagged total assets |
| ROA | CMIE Prowess | Return on assets is measured as net income divided by average total assets |
| REV | CMIE Prowess | Sales Revenue |
| WC | CMIE Prowess | [(current assets – cash and short-term investments) – (current liabilities –short-term debt)] |
| Variable name | Source | How we measure |
|---|---|---|
| ABSAWCA | Derived value | Absolute value of abnormal working capital accruals (AWCA) |
| ABSDTA | Derived value | The absolute value of residuals from |
| Subs | CMIE Prowess | Indicator variable for subsidiary firms |
| Big 4 | CMIE Prowess | Indicator variable if the parent firm is audited by any subsidiaries of big 4/5 audit firms. Some of the Indian subsidiaries of Big 4/5 include C. C. Chokshi & Co. (Deloitte), BSR & Co. (KPMG), S.R. Batliboi & Co (E&Y), S.R. Batliboi & Co (Grant Thornton) etc. |
| BTD | CMIE Prowess | Book tax difference defined as Pre-tax income – (Current tax expense/Statutory tax rate), scaled by lagged total assets |
| Parent_Size | CMIE Prowess | The indicator variable for total assets of the parent company relative to the subsidiary is in the upper quartile and zero otherwise |
| Capneed | CMIE Prowess | Percentage change in equity shares, preference shares and long-term debt in the following year |
| Growth | CMIE Prowess | Growth in total assets |
| Growth_sales | CMIE Prowess | Growth in total revenue |
| Inv | CMIE Prowess | Ratio of inventory to total assets |
| Lev | CMIE Prowess | Total borrowings scaled by total assets |
| Loss | CMIE Prowess | Cumulative percentage of sample years with reported losses by the firm |
| ROE | CMIE Prowess | Return on equity |
| Size | CMIE Prowess | Natural log of total assets |
| Std_ROA | CMIE Prowess | Standard deviation of return on assets calculated at the firm level over the sample period for firms with a minimum of three annual observations |
| Acc | Derived value | Total accruals measured as (ΔNon-cash current assets-ΔCurrent liabilities)-Depreciation scaled by lagged total assets |
| Age | CMIE Prowess | Years since incorporation (Natural log) |
| AWCA | Derived value | Abnormal working capital accruals from |
| PPE | CMIE Prowess | Plant, property and equipment scaled by lagged total assets |
| ROA | CMIE Prowess | Return on assets is measured as net income divided by average total assets |
| REV | CMIE Prowess | Sales Revenue |
| WC | CMIE Prowess | [(current assets – cash and short-term investments) – (current liabilities –short-term debt)] |
Source(s): Table created by authors'
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