Table 5.

Random Audits and Business Failure: Sample Partitions by Compliance and Administrative Costs

Panel A. Out of Business
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Dependent Variable: Out of Business
Audited	0.143*”	0.115***	0.021	0.038	-0.013	0.187*"	0.005	0.06/**
	(3.12)	(3.49)	(0.86)	(1.34)	(-0.26)	(5.82)	(0.22)	(2.12)
Intercept	0.294***	0.247***	0.343***	0.292***	0.303***	0.250***	0.334***	0.305***
	(9.56)	(11.36)	(19.88)	(14.58)	(8.74)	(12.04)	(19.44)	(15.15)
Sample	Noncompliant, low hours	Noncompliant, high hours	Compliant, low hours	Compliant, high hours	Noncompliant, low length	Noncompliant, high length	Compliant, low length	Compliant, high length
N	552	1.044	1,950	1,470	486	1,110	2,018	1.402
R-Squared	0.022	0.016	0.000	0.002	0.000	0.039	0.000	0.004
Cross Equation Tests on Audited Coefficient
(1) vs (2):	-0.028	(1) vs (3):		0.122**
	(-0.50)			(2.34)
(3) vs (4):	0.017	(2) vs (4):		0 077*
	(0.46)			(1.75)
(5) vs (6):	0.199***	(5)vs (7):		-0.018
	(3.42)			(-0.33)
vs (8):	0.057	(6)vs (8):		0.124***
	(1.49)			(2.85)
Panel B. Defunct
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Dependent Variable: Out of Business
Audited	0.027**	0.027**	0.000	0.011	0.018	0.031***	-0.004	0.016**
	(2.52)	(2.41)	(0.02)	(1.46)	(1.58)	(2.98)	(-0.94)	(1.97)
Intercept	0.005	0.011**	0.008**	0.013***	0.007	0.010**	0.009***	0.012**
	(1.42)	(2.12)	(2.36)	(3.36)	(1.42)	(2.12)	(2.99)	(2.57)
Sample	Noncompliant, low hours	Noncompliant, high hours	Compliant, low hours	Compliant, high hours	Noncompliant, low length	Noncompliant, high length	Compliant, low length	Compliant. high length
N	552	1,044	1,950	1,470	486	1,110	2,018	1.402
R-Squared	0.022	0.008	0.000	0.002	0.005	0.010	0.000	0.003
Cross Equation Tests on Audited Coefficient
(1) vs (2):		0.000	(1) vs (3):	0.027**
		(0.01)		(2.32)
(3) vs (4):		0.011	(2) vs (4):	0.016
		(1.24)		(1.19)
(5) vs (6):		0.013	(5) vs (7)	0.021*
		(0.84)		(1.80)
(7)vs (8):		0.020**	(6) vs (8):	0.015
		(2.19)		(1.10)

This table presents the results of our going concern regression tests using the random audit sample. In each column, we run our main specification on a subset of the sample based on compliance and administrative costs (audit hours or audit length). The specification is a linear probability model, where the dependent variable is Out of Business in Panel A and Defunct in Panel B. 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.