Variable

Definition

Explained variable

possibility of future losses for the company—later_loss_i,i+1

If the company’s profit margin before interest and tax for t + 1 period is less than 0, it is 1, otherwise it is 0;

audit fee—ln_auditfee_i,i

The logarithm of audit fees for period t of the enterprise;

Explanatory variables

Cost stickiness—dcscost_i,i

Calculated using the formulas (1) and (2) above;

Control variable

Enterprise size—size

Logarithm of total assets of the enterprise;

Assets and liabilities—lev

Corporate liabilities/total corporate assets;

Business complexity—cfratio

(Receivable + inventory)/total assets;

growth rate—growth

(Net profit for the current year-Net profit for the previous year)/Net profit for the previous year;

a loss occurred in t years—loss

1 if the enterprise incurred a loss in year t; otherwise, 0;

Shareholding ratio of major shareholders—ownership

Number of shares held by the largest shareholder/total capital of the company;

Executive Shareholding—stock_e

Number of shares held by executives/total number of shares;

same

Same is 1 if the general manager and the chairman are the same person, otherwise 0;

Independent director ratio—EID

Number of independent directors/boards;

big4

If the accounting firm is the Big Four, the value of big4 is 1, otherwise it is 0;

audit opinion—audittype

At period t, if the audit opinion is non-standard, the value is 1, otherwise it is 0;