Audit Committee Disclosure Tone and Corporate Violations in China: Textual Analysis
Table 1
Variable definition.
Variable
Definition
VIOL
Whether the company breaks the rules (dummy variable that equals 1 if the firm violates, and 0 otherwise)
VIOLN
Total number of violations
TONE
The net positive tone of the AC report ((positive – negative)/(positive + negative))
SIZE
Firm size (natural logarithm of firm’s total assets)
LEV
Systematic risks (ratio of total liabilities divided by total assets)
ROA
Firm profitability (measured using net income before extraordinary item divided by total assets)
GROW
Calculating the annual growth of sales as the change in sales from the previous year scaled by sales at the beginning of the year
TOP1
Ownership concentration (share proportion of the largest shareholder)
DUAL
Combining the position of the chairman (dummy variable that equals 1 if the combination of the general manager and chairman of the board, and 0 otherwise)
INDI
Ratio of independent directors (the percentage of independent directors on the board)
BOARDN
Board size (number of board members)
BIG10
Scale of accounting firm (dummy variable that equals 1 if the company is audited by top 10 accounting firms, and 0 otherwise)
SOE
Nature of property right (dummy variable that equals 1 if the company is a state-owned property right, and 0 otherwise)
TURN
Annual turnover rate of stocks (the total number of shares traded divided by the number of shares outstanding at the end of the year)
