Table 3.

Random Audits and Business Failure: Compliance Level

	(1)	(2)	(3)	(4)	(5)	(6)
	Dependent Variable: Out of Business			Dependent Variable: Defunct
Audited	0.060***	0.126***	0.028	0.012***	0.027***	0.004
	(186)	(4.67)	(1.49)	(111)	(337)	(1.10)
Intercept	0.304***	0.266***	0.322***	0.010***	0.009**	0.010***
	(28.74)	(14.83)	(24.67)	(4.66)	(232)	(3.92)
Sample	Full sample	Noncompliant firms	Compliant firms	Full sample	Noncompliant firms	Compliant firms
N	5,016	1,596	3,420	5,016	1,596	3,420
R-Squared	0.004	0.018	0.001	0.002	0.008	0.000
Cross Equation Tests on Audited Coefficient
(2) vs (3):	0.098***
	(2.98)
(5) vs (6):	0.022**
	(2.52)

This table presents the results of our business failure regression tests using the random audit sample. The specification is a linear probability model, where the dependent variable is Out of Business in columns 1–3 and Defunct in columns 4–6. The independent variable of interest is Audited, which indicates whether a firm was audited as part of the National Research Program. The sample consists of 2508 audited firms and 2508 control firms (one observation per firm). Observations are weighted using the sampling weights (inverse probability of being selected) to generalize the results to the population. All variables are defined in Appendix 1. Robust t-statistics are presented below the coefficients in parentheses. ***, **, * denotes statistical significance at the 10, 5, or 1% level, respectively.