a ** Signifies statistically significant (p-value is less than 0.05) and * signifies marginally significant (p-value is less than 0.10) using a t-test. †† signifies statistically significant (p-value is less than 0.05) and † signifies marginally significant (p-value is less than 0.10) using a X2 test. The X2 test is used for statistical tests of differences in the two samples where the underlying variable is a dummy variable, while the t-test is used otherwise.
Total Assets = total dollar value of the company’s assets in millions (Compustat data item 6);
Net Income = total dollar value of the company’s bottom-line net income in millions (Compustat data item 172);
Market Value = total market value in millions of dollars calculated as the year-end closing share price multiplied by the year-end number of shares outstanding (Compustat data item 24 multiplied by Compustat data item 25);
Market/Book = the ratio of the company’s market value divided by the company’s book value of net assets(market value from above/Compustat data item 216);
Price /Earnings = measured as the company’s year-end closing price divided by earnings per common share excluding extraordinary items (Compustat data item 24/Compustat data item 58);
FreeC = net cash flows from operating activities (Compustat data item 308) less average capital expenditures (Compustat data item 128) deflated by total assets (Compustat data item 6);
Analyst = dummy variable equal to 1 if the company was followed by analysts, 0 otherwise;
FinRaised = sum of new debt and equity issued by the company (Compustat data item 108 plus data item 111) deflated by total assets (Compustat data item 6);
EPSGrowth = dummy variable equal to 1 if the company had at least four quarters of continuous earnings per share growth prior to the GAAP violation, 0 otherwise;
LEV = total debt (Compustat data item 34 plus data item 9) deflated by total assets (Compustat data item 6);
CFOEXP = years of work experience as a CFO;
ELSE = dummy variable equal to 1 if the CFO has prior experience at another company, 0 otherwise;
MBA = dummy variable equal to 1 if the CFO has a MBA degree, 0 otherwise; and
CPA = dummy variable equal to 1 if the CFO has a CPA accreditation, 0 otherwise.
Note that Price /Earnings ratios and Market/Book ratios are only calculated for companies with positive earnings and book values, respectively.