Variable  Definition 
Dependent Variables 

Accrualsbased 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 
Firmlevel 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 