********************************************************************************
Eliminations 
********************************************************************************
drop if sic1==.
drop if sic1>=4400 & sic1<5000
drop if sic1>5999 & sic1<6501
drop if sales<0 
drop if tas<0
********************************************************************************
Industry Classification
********************************************************************************
generate twodigit= int(sic1/100)
generate industry=.
replace industry=1 if inrange(twodigit, 1, 14)
replace industry=2 if inrange(twodigit, 15, 17)
replace industry=3 if inrange(twodigit, 20, 21)
replace industry=4 if inrange(twodigit, 22, 23)
replace industry=5 if inrange(twodigit, 24, 27)
replace industry=6 if inrange(twodigit, 28, 30)
replace industry=7 if inrange(twodigit, 31, 34)
replace industry=8 if inrange(twodigit, 35, 39)
replace industry=9 if inrange(twodigit, 40, 47)
replace industry=10 if inrange(twodigit, 50, 52)
replace industry=11 if inrange(twodigit, 53, 59)
replace industry=12 if inrange(twodigit, 70, 79)
replace industry=13 if inrange(twodigit, 80, 99)

********************************************************************************
Construction of Real Earnings Management Variables
********************************************************************************
xtset id year
by id: generate cfor=cfo/L.tas
by id: generate last=1/L.tas
by id: generate revr=sales/L.tas
by id: generate Drev=(sales-L.sales)
by id: generate Drevr=(Drev/L.tas)
by id: generate lS=(L.sales-L2.sales)
by id: generate lDrevr=lS/L.tas
by id: generate Dinv=(inv-L.inv)
egen produc= rowtotal(cogs Dinv) if cogs!=. | Dinv!=. 
by id: generate producr=produc/L.tas
egen Discr= rowtotal (rd sga) if rd!=. | sga!=. 
by id: generate Discrr=Discr/L.tas
by id: generate revr2=L.sales/L.tas
by id: generate accr=ni-cfo
by id: generate accrtas=(accr/l.tas)
by id: generate ppetas=(l.ppe/l.tas)
generate suspect=0 
replace suspect=1 if (ni/L.tas)<=0.005 & (ni/L.tas)>=0




********************************************************************************
Calculation of Abnormal CFO
********************************************************************************
generate abnormalcfor=.
capture program drop abnormalcfor
program abnormalcfor
forvalues i = 1(1)13 {
capture reg cfor last revr Drevr if industry==`i'
capture predict abnormalcfor`i' if industry==`i', resid
replace abnormalcfor= abnormalcfor`i' if industry==`i'
capture drop abnormalcfor`i'
}
end
abnormalcfor
********************************************************************************
Calculation of Abnormal Discretionary
********************************************************************************
generate abnormalDiscrr=.
capture program drop abnormalDiscrr
program abnormalDiscrr
forvalues i = 1(1)13 {
capture reg Discrr last revr2 if industry==`i'
capture predict abnormalDiscrr`i' if industry==`i', resid
replace abnormalDiscrr= abnormalDiscrr`i' if industry==`i'
capture drop abnormalDiscrr`i'
}
end
abnormalDiscrr
********************************************************************************
Calculation of Abnormal Production
********************************************************************************
generate abnormalproducr=.
capture program drop abnormalproducr
program abnormalproducr
forvalues i = 1(1)13 {
capture reg producr last revr Drevr lDrevr if industry==`i'
capture predict abnormalproducr`i' if industry==`i', resid
replace abnormalproducr= abnormalproducr`i' if industry==`i'
capture drop abnormalproducr`i'
}
end
abnormalproducr