*3.2. Dependent Variable*

The dependent variable is TADV as our aim is to analyse what specific corporate governance factors are associated with this behaviour. For portraying TADV, we code a binary dependent variable (BINARYDELAY), which equals 1 if the company does not present the annual report on time (i.e., exceeding the legal deadline at least by one day) and 0 otherwise.

All Estonian SMEs have to disclose their financial statements (i.e., balance sheet, income statements and explanatory notes) once per year and online. This presentation of the annual report has a legal deadline of six months from the fiscal year end. For the vast majority of firms, the fiscal year end is also the calendar year end, that is, the 31st of December every year. Thus, in the latter circumstance, the deadline for uploading the annual report is the 30th of June the following year.

In order to enhance the context of the violation further, we distinguish between mild and severe delayers in further analysis. Namely, as a mild delay, we consider a delay of up to 365 days (i.e., one year) and a severe delay is over 365 days. Such coding is based on the Estonian legal considerations. Namely, according to the Estonian Commercial Code, this is the minimal date after which the Estonian Business Register can start the deletion procedure of a firm because of not submitting the annual report. We base the severity of the submission delay on this legal consideration to avoid a subjective selection of the relevant break-even time. The usage of two types of violators enables us to study, how non-violators differ from either modest or severe violators, but also, how modest and severe violators differ from each other. It is not rational to distinguish between different types of non-violators, as firms can freely choose when to submit their annual report during the legally allowed half-year period after the end of the fiscal year, and usually, they do it in June.
