Variable

Definition

Dependent Variables

Accruals-based earnings management

The residuals from the following regression:

Abnormal Level of Operating Cash Flows

The absolute value of residuals from the following regression:

Abnormal Level of Production Costs

The absolute value of residuals from the following regression:

Abnormal Level of Discretionary Expenses

The absolute value of residuals from the following regression:

Sum of Real Earnings Management

The sum of abnormal level of operating cash flows, abnormal level of production costs, abnormal level of discretionary expenses

Variables of interest

Internal control quality

The natural logarithm of the Internal Control of Listed Companies Index

Firm-level life cycle

Two indicator variables: LCGROWTH is equal to1 if the firm is a growth firm, and 0 otherwise; LCMATURE is equal to 1 if the firm is a mature firm, and 0 otherwise

Control variables

GROWTH

The growth rate of sales

ROE

Net profit/Average equity

LEV

Total debt/total asset

SIZE

The natural logarithm of the total asset

STATE

An indicator variable that is equal to 1 if the firm is controlled by state, and 0 otherwise