Table 2 Variable measurement Variable... | Emerald Publishing

Table 2

Variable measurement

Variable	Measurement
Cumulative Abnormal Return selama 3 hari periode jendela (⁠ ${C A R 3}_{i, t}$ ⁠)	Cumulative abnormal return from one days before to one days after the firm’s earnings announcement. Cumulative abnormal return = an addition function from absolute value of daily abnormal return. Abnormal return is the difference between actual return and expected return during the window period. Return = difference between stock price on day t and stock price on day t−1 divided by stock price on day t−1. Expected return is estimated using the mean-adjusted model, with an estimation period of 200 days before the window period, excluding −10 to −6 and +6 to +10. We use cumulative of absolute value of daily abnormal return as a proxy for dependent variable
Earnings Surprise (⁠ ${E S}_{i, t}$ ⁠)	The change in a firm i net income for a t period is deflated by total assets at the end of the period (Wijayana and Gray, 2018)
Eanings Management (⁠ ${A B S E M}_{i, t}$ ⁠)	Earnings management is measured using the absolute value of discretionary accruals. Discretionary accruals are estimated using the modified Jones model with the following equation 1. $\frac{{T o t a l A c c r u a l s}_{i, t}}{{A s s e t s T o t a l}_{i, t - 1}} = \propto_{0} + β_{1} \frac{1}{{A s s e t s T o t a l}_{i, t - 1}} + β_{2} \frac{{∆ R e v e n u e}_{i, t} - {∆ R e c e i v a b l e}_{i, t}}{{A s s e t s T o t a l}_{i, t - 1}} + β_{3} \frac{G r o s s P P E}{{A s s e t s T o t a l}_{i, t - 1}} + ε_{i, t}$ 2. $T o t a l A c c r u a l s = ∆ C u r r e n t A s s e t s - ∆ C a s h - ∆ C u r r e n t L i a b i l i t i e s + ∆ S h o r t T e r m D e b t - D e p r e c i a t i o n$ We conduct regression analysis to get discretionary accrual for each year and industry sector
${D u m m y E M}_{i, t}$	Dummy variable EM takes a value of 1 if the discretionary accrual value is positive, and 0 if it is negative
${A B S E M}_{i, t} * {D u m m y E M}_{i, t}$	The interaction term between the absolute value of discretionary accruals (\|EM\|) and the EM dummy variable captures income-increasing earnings management
${s q E S}_{i, t} * {A B S E M}_{i, t}$	The interaction between earnings surprise and earnings management. This study use the inverse of the original earnings surprise to interact with earnings management to obtain a measure with smaller numbers. This sqES is measured by squared of earnings surprise
${E S G}_{i, t}$	Firm ESG performance i in period t from the Thomson Reuters database
$s q {E S}_{i, t} * {A B S E M}_{i, t} * {E S G}_{i, t}$	The interaction term between squared of earnings surprise, earnings management, and ESG
${R O A}_{i, t}$	A firm’s profitability is measured by the ratio of its firm i EBIT in period t to its total assets in period t
${G r o w t h 2}_{i, t}$	${G r o w t h}_{i, t}$ is Market-to-Book ratio in period t, measured by market capitalization divided by book value of equity. The inverse of growth variable $({G r o w t h 2}_{i, t})$ is measured by one divided by growth then multiplied by −1
${W C}_{i, t}$	Working capital firm i in period t, measured by the difference between current assets and current liabilities deflated by total assets
${C a s h R a t i o}_{i, t}$	Firm i quick ratio in period t, measured by cash and cash equivalents per total current liabilities
${s q r t C a s h R a t i o}_{i, t}$	Squared Root of Cash Ratio
Sector fixed effect	A dummy variable for each sector
Year fixed effect	A dummy variable for each year

Variable	Measurement
Cumulative Abnormal Return selama 3 hari periode jendela ( ${C A R 3}_{i, t}$ )	Cumulative abnormal return from one days before to one days after the firm’s earnings announcement. Cumulative abnormal return = an addition function from absolute value of daily abnormal return. Abnormal return is the difference between actual return and expected return during the window period. Return = difference between stock price on day t and stock price on day t−1 divided by stock price on day t−1. Expected return is estimated using the mean-adjusted model, with an estimation period of 200 days before the window period, excluding −10 to −6 and +6 to +10. We use cumulative of absolute value of daily abnormal return as a proxy for dependent variable
Earnings Surprise ( ${E S}_{i, t}$ )	The change in a firm i net income for a t period is deflated by total assets at the end of the period (Wijayana and Gray, 2018)
Eanings Management ( ${A B S E M}_{i, t}$ )	Earnings management is measured using the absolute value of discretionary accruals. Discretionary accruals are estimated using the modified Jones model with the following equation1. $\frac{{T o t a l A c c r u a l s}_{i, t}}{{A s s e t s T o t a l}_{i, t - 1}} = \propto_{0} + β_{1} \frac{1}{{A s s e t s T o t a l}_{i, t - 1}} + β_{2} \frac{{∆ R e v e n u e}_{i, t} - {∆ R e c e i v a b l e}_{i, t}}{{A s s e t s T o t a l}_{i, t - 1}} + β_{3} \frac{G r o s s P P E}{{A s s e t s T o t a l}_{i, t - 1}} + ε_{i, t}$ 2. $T o t a l A c c r u a l s = ∆ C u r r e n t A s s e t s - ∆ C a s h - ∆ C u r r e n t L i a b i l i t i e s + ∆ S h o r t T e r m D e b t - D e p r e c i a t i o n$ We conduct regression analysis to get discretionary accrual for each year and industry sector
${D u m m y E M}_{i, t}$	Dummy variable EM takes a value of 1 if the discretionary accrual value is positive, and 0 if it is negative
${A B S E M}_{i, t} * {D u m m y E M}_{i, t}$	The interaction term between the absolute value of discretionary accruals (\|EM\|) and the EM dummy variable captures income-increasing earnings management
${s q E S}_{i, t} * {A B S E M}_{i, t}$	The interaction between earnings surprise and earnings management. This study use the inverse of the original earnings surprise to interact with earnings management to obtain a measure with smaller numbers. This sqES is measured by squared of earnings surprise
${E S G}_{i, t}$	Firm ESG performance i in period t from the Thomson Reuters database
$s q {E S}_{i, t} * {A B S E M}_{i, t} * {E S G}_{i, t}$	The interaction term between squared of earnings surprise, earnings management, and ESG
${R O A}_{i, t}$	A firm’s profitability is measured by the ratio of its firm i EBIT in period t to its total assets in period t
${G r o w t h 2}_{i, t}$	${G r o w t h}_{i, t}$ is Market-to-Book ratio in period t, measured by market capitalization divided by book value of equity. The inverse of growth variable $({G r o w t h 2}_{i, t})$ is measured by one divided by growth then multiplied by −1
${W C}_{i, t}$	Working capital firm i in period t, measured by the difference between current assets and current liabilities deflated by total assets
${C a s h R a t i o}_{i, t}$	Firm i quick ratio in period t, measured by cash and cash equivalents per total current liabilities
${s q r t C a s h R a t i o}_{i, t}$	Squared Root of Cash Ratio
Sector fixed effect	A dummy variable for each sector
Year fixed effect	A dummy variable for each year

Source(s): Authors’ own work