Finance Variable

Name	Abbreviations	Formula	Detail
Total Accruals	TA	$$\mathrm{TA}_t=\left(\Delta \mathrm{CA}_t-\Delta \mathrm{CLt}-\Delta \mathrm{Cash}_t+\Delta \mathrm{STD}_t-\mathrm{Dep}_t\right) / \mathrm{A}_{t-1}$$	$\Delta \mathrm{CA}$ reflects the change in current assets, $\Delta \mathrm{CL}$ is the change in current liabilities, $\Delta \mathrm{Cash}$ is the change in cash and cash equivalents, $\Delta \mathrm{STD}$ is the change in short-term debt, Dep is the depreciation and amortization expense, and $\mathrm{A}$ is the total assets.
Nondiscretionary Accruals	NDA	$$\mathrm{NDA}_t=\alpha_1\left(1 / \mathrm{A}_{t-1}\right)+\alpha_2\left(\Delta \mathrm{REV}_t-\Delta \mathrm{REC}_t\right)+\alpha_3\left(\mathrm{PPE}_t\right)$$	$\mathrm{A}_{t-1}$ is the total assets at $t-1$; $\Delta \mathrm{REV}_t$ is the change in revenues in year $t$ with respect to $t-1$, scaled by total assets at $t-1 ; \Delta \mathrm{REC}_t$ is the change in net receivables in year $\mathrm{t}$ with respect to $t-1$, scaled by total assets at $t-1 ; \mathrm{PPE}_t$ is the gross property plant and equipment in year $t$, scaled by total assets at $t-1 ; \alpha_{1,2,3}$ is the firm-specific parameters. The firm-specific parameters, $\alpha_1, \alpha_2$, and $\alpha_3$, are estimated using OLS as $a_1, a_2$, and $a_3$ from the below model, where TA is total accruals scaled by lagged total asset: $$\mathrm{TA}_t=a_1\left(1 / A_{t-1}\right)+a_2\left(\Delta \mathrm{REV}_t-\Delta \mathrm{REC}_t\right)+a_3\left(\mathrm{PPE}_t\right)+\varepsilon$$
Discretionary Accruals	DA	$$\mathrm{DA}_{\mathrm{it}}=\mathrm{TA}_{\mathrm{it}}-\mathrm{NDA}_{\mathrm{it}}$$	$\mathrm{TA}_{i t}$ is the total accruals for firm $i$ in year $t$; $\mathrm{NDA}_{\mathrm{it}}$ is the nondiscretionary accruals for firm $i$ in year $t$;