Variables

Country
Stock Market Volatility

Volatility of Real GDP
Growth Rate

Cash Flow Risk

Leverage Ratio

Billionaire Wealth/GDP

Gini Coefficient

Volatility of
Exchange Rate

Volatility of Inflation

Volatility of Fiscal Deficit/
GDP
Trade Openness:
(Exports+Imports)/GDP
Ratio of Stock Market
Capitalization/GDP
Stock Market Turnover/
Market Capitalization
Stock Exchange Age

Log of Number of Listed
Companies

Log of GDP per capita

Fraction of Time in Which
Insider Trading Law is
in Place
Fraction of Time Since the
First Insider Trading Prosecution
Insider Trading Index

Legal Corruption Index

Description
Country name

Defined as the standard deviation of monthly returns over December 1984 to December 1998, multiplied by 100;
The monthly return in U.S. dollars is defined as the change in the log of the stock market index (in dollar terms).

Source: Morgan Stanley Capital International Dataset and Emerging Markets Database.
Computed as the standard deviation of the annual real GDP growth rate over 1985-1998, multiplied by 100.
Real GDP growth rate is the first difference in the log of GDP in 1995 constant U.S. dollars.
Source: World Bank's World Development Indicators.

Measures the variability of operating income.
Defined as the standard deviation of the change in operating income relative to mean operating income in absolute value over t
Source: Claessens, Djankov and Nenova (1999).
Defined as the ratio of total debt to the sum of total debt and the market value of the equity.
Source: Claessens, Djankov, and Nenova (1999).

Defined as the ratio of the wealth of the billionaires (acquired through entrepreneurship or inheritance) relative to GDP, in 1993
Source: Forbes magazine, cited by Morck, Stangeland, and Yeung (1998).

Measures the degree of inequality in income distribution. Average of the data from Barro-Lee dataset and those from World De
Report (1998/99) issue.
Defined as the standard deviation of the change in monthly log nominal exchange rate with respect to US$, multiplied by 100.
The period is over 1985-98.
Source: The nominal exchange rate is the monthly average exchange rate from the IMF’s International Financial Statistics.
Defined as the standard deviation of the monthly inflation rate over January 1985 to December 1998.
Inflation data is defined as the change in the log consumer price index, which is from the IMF’s IFS data base (line 64).
Computed as the standard deviation of the annual ratio of the government budget deficit to GDP over 1985 to 1998.
The data on the overall budget deficit/GDP are obtained from the World Bank's World Development Indicators CD Rom.
The average value of (imports + exports)/GDP over the period of 1985-98.
Source: World Bank's World Development Indicators CD Rom.
Measures the developedness of stock market. Data are for the year of 1988.
Source: World Bank's World Development Indicators CD Rom.
Measures the turnover ratio of stock markets.
Source: World Bank's World Development Indicators CD Rom.
The age of the main stock exchange in each country is calculated as 1998 minus the founding year of the exchange.
The data on the founding year of the exchange are obtained from Bhattacharya and Daouk (2002).
Computed as the average number of listed companies during 1990-1996
Source: the World Bank's World Development Report 2000 (Table 3).

GDP per capita is measured in 1995 constant U.S. dollars, averaged over 1985-1998.
Source: World Bank's World Development Indicators CD Rom.
Calculated as the fraction of the sample time that an insider trading law already exists for each country.
Data on the year when an insider trading law is introduced are obtained from Bhattacharya and Daouk (2002).
Calculated as the fraction of the sample time after the first insider trading prosecution is launched in each country.
The data on the year of the first prosecution are extracted from Bhattacharya and Daouk (2002).

The insider trading index is created from the question: “insider trading is not common in domestic stock markets”, 1=strongly d
It is rescaled by the following formula: new value = 8-original value. We use the average of the values in 1997 and 1998.
As a result, a higher number implies more insider trading or legal corruption.

We re-scale the insider-trading index further by dividing it by its standard deviation in the sample.
Source: Global Competitiveness Report (1998 and 1999).

The legal corruption index is created from the question: “Irregular payments to judges or other officials involved in the enforce
It is re-scaled by the following formula: new value = 8-original value. We use the value of 1997.
As a result, a higher number implies more legal corruption.
Source: Global Competitiveness Report (1998).

e period of 1991-96.

isagree, 7=strongly agree.

ment and execution of judgments are not common and do not influence the outcome of court proceedings”, 1=strongly disagree, 7=s trongly

ongly disagree, 7=s trongly agree.

Country
Argentina
Australia
Austria
Belgium
Brazil
Canada
Chile
China
Colombia
Czech
Denmark
Egypt
Finland
France
Germany
Greece
Hong Kong
Hungary
India
Indonesia
Ireland
Israel
Italy
Japan
Jordan
Korea
Malaysia
Mexico
Morocco
Netherland
Newzland
Nigeria
Norway
Pakistan
Peru
Philippines
Poland
Portugal
Russia
Saudi Arabria
Singapore
Slovakia
South Africa
Spain
Sri Lanka
Sweden
Switzerland
Taiwan
Thailand
Turkey
United Kingdom

Stock Market Volatility
21.19
7.71
7.84
5.45
18.23
4.97
8.11
14.56
8.35
9.38
5.44
7.49
7.73
6.33
6.36
11.03
9.34
11.91
9.28
14.41
7
6.85
7.64
7.49
4.6
11.16
10.3
14.03
4.55
4.58
8.26
15.67
7.75
8.86
9.83
11
17.65
10.51
28.53
4.34
9.09
8.2
9
7.42
8.97
6.75
5.59
13.22
11.76
18.29
5.62

Volatility of Real GDP Growth Rate
6.23
1.72
1.18
1.46
3.36
2.11
2.15
3.03
1.3
5.55
1.38
1.5
4
1.45
1.35
1.55
3.17
4.41
2.12
1.62
3.12
2.14
1.35
1.91
6.68
2.15
3.23
4.21
6.02
1.03
2.22
3.38
1.64
2.22
7.49
3.78
5.66
2.06
5.6
4.13
3.53
6.46
2.17
1.82
1.56
1.89
1.7
2.43
3.37
4.33
2.09

Cash Flow Risk
0.84
0.43
1.24
1.06
1.39
0.53
0.31
0.55
0.95
0.52
0.66
0.6
1.02
0.46
0.4
0.34
0.42
0.31
0.32
0.39
0.81
0.36
0.33
0.39
0.5
0.35
0.2
0.82
0.38
0.68
0.51
0.31
0.87

0.45
0.27
0.77
0.2
0.63
0.58
0.45
0.44
0.7
0.36

United States
Venezuela
Zimbabwe

4.33
14.67
10.88

1.7
4.83
4.66

0.42
1

Leverage Ratio
0.33
0.2
0.46
0.42
0.93
0.27
0.22
0.55
0.47
0.23
0.33

Billionaire Wealth/GDP
26.38
7.72
0
0
17.37
24.9
71.74

0.59
0.48
0.37
0.17
0.42
0.17
0.55
0.56
0.28
0.3
0.72
0.43

0
13.93
46.38
66.67
350.96

2.49
0.14
0.34

31.99
70
18.34

0.25
0.27

18.73

0.57
1
0.1
0.24
0.12
0.59

0
0
54.84

0.21

50.87

0.08
0.29
0.28
0.26
0.54
0.2
0.92
0.1
0.18

13.16
5.66

0
0

8.24
47.71
0
41.43
10.35
13.4

0

0
57.03
48.86
39.06
0
8.56

Gini Coefficient
35.48
23.1
26.63
59.25
31.54
51.25
41.5
54.4
26.6
27.85
35
27.67
36.66
29.72
35.11
40.53
25.04
30.29
34.42
37.3
35.5
34.31
34.07
43.4
36.14
49.93
52.13
39.2
29.94
31.24
45
30.26
31.21
49.95
46.15
26.06
40.58
31
39
19.5
58.4
34.81
34.47
27.61
36.1
29.32
43.97
51
28.45

Volatility of Exchange Rate
17.24
2.41
2.76
2.73
63.53
1.05
2.21
12.53
1.82
2.88
2.69
0.21
2.77
2.63
2.76
3.22
0.12
1.93
2.2
9.68
2.74
2.08
2.7
3.1
2.03
4
2.42
5.53
1.7
2.76
2.5
15.32
2.4
1.61
1.25
2.96
109.55
3.16
117.9
0.01
1.39
1.75
3.94
2.71
0.9
2.54
3.13
1.63
3.32
4.44
2.77

0.16
0.41

24.04
43.1

37.32
44.78
56.8

0
8.99
4.93

Volatility of Inflation
25.51
0.07
0.01
0.01
13.39
0.02
0.08
0.09
0.04
0.02
0.01
0.02
0.02
0.01
0.02
0.06
0.07
0.05
0.03
0.17
0.08
0.86
0.02
0.01
0.08
0.02
0.02
0.42
0.02
0.01
0
0.25
0.02
0.09
24.36
0.07
0.1
0.04
0.31
0
0.01
0.01
0.02
0.02
0.05
0.03
0.02
0
0.02
0.19
0.02

Volatility of Fiscal Deficit/GDP
1.67
1.86
0.72
2.25
5.15
1.12
1.39
0.25
2.19
1.38
2.4
4.58
5.97
1.79
0.47
5.04
2.44
1.38
1.71
4
2.51
3.11
2.19
4.95
0.88
3.82
6.04
2.07
1.55
3.03
2.7
3.5
1.04
2.76
1.74
0.66
3.31
4.45
5.71
2.53
1.72
2.11
5.71
0.7
1.67
3.18
1.78
2.92

Trade Openness: (Exports+Imports)/GDP
8.15
18.28
38.15
64.88
8.48
29.42
29.7
15.86
16.39
56.51
33.22
25.39
27.79
21.97
23.39
21.54
130.29
36.14
10.23
24.66
58.92
41.67
21.08
9.42
62.17
32.69
75.85
20.39
27.97
50.71
28.48
33.19
35.85
17.63
13.5
33.52
22.45
34.5
25.85
38.8
180.87
51.09
24.62
20.53
35.25
32
34.9
36.79
18.61
26.48

0.01
0.27
0.09

1.46
3.23
1.93

10.54
25.51
28.84

Stock Market Capitalization/GDP
1.6
52.07
6.99
38.1
9.74
49.41
28.36
0.54
2.92
14.89
27.15
5.02
29.06
25.43
22.88
6.63
127.6
1.51
8.64
0.28
15.59
12.43
16.17
133.87
36.91
67.21
7.52
2.01
49.05
30.23
4.2
14.6
6.39
3.25
11.3
0.19
14.57
0.05
40.85
93.72
7.94
143.02
26.43
6.75
55.02
75.4
14.29
1.25
92.29

Stock Turnover/Market Capitalization
34.99
41.9
86.05
44.35
44.45
9.67
205.67
8.98
41.03
41.1
27.82

131.25
30.01
43.65
29.06
40.87
39.85
24.5
48.25
35.3
40.45
20.04
121.47
43.4
41.04
8.05
60.7
22.7
1.25
62.35
28.71
34.39
26.31
105.04
32.59
15.24
15.6
28.7
109.42
10.26
10.05
39.65
47
77.53
83.59
35.05

Stock Exchange Age
144
139
227
197
108
120
105
8
70
127
79
108
86
172
413
122
107
134
123
86
205
45
190
120
20
42
25
104
69
298
128
38
179
51
47
71
181
173
4
14
68
7
111
167
102
135
60
37
24
132
225

57.26
3.02
9.91

73.1
22.46
6.82

206
158
102

Log of Number of Listed Companies
4.95
7.07
4.64
4.93
6.3
7.18
5.68
6.48
5.24
6.84
5.47
6.47
4.58
6.53
6.54
5.42
6.41
3.85
8.9
5.59
4.38
6.47
5.48
7.11
4.77
6.64
6.5
5.28
3.87
5.34
5.16
5.21
5.18
6.66
5.48
5.39
4.73
5.03
4.95
4.24
5.57
6.74
6.45
5.91
5.47
5.47
5.37

Log of GDP per capita
8.91
9.8
10.2
10.15
8.36
9.81
8.07
6.05
7.5
8.54
10.37
6.82
10.07
10.13
10.28
9.26
9.88
8.39
5.73
6.69
9.46
9.52
9.78
10.56
7.34
8.97
8.1
8.04
7.12
10.09
9.61
5.4
10.31
6.11
7.72
6.95
7.98
9.15
7.97
8.93
10.03
8.16
8.14
9.48
6.44
10.12
10.73

6.09
5.49
7.71

7.65
7.87
9.78

9.07
4.49
4.16

10.15
8.14
6.47

Fraction of Time in Which Insider Trading Law is in Place
0.57
0.57
0.43
0.64
1
1
1
1
0.64
1
0.57
1
0.71
1
0.36
0.79
0.57
1
0.5
0.89
0.64
1
0.57
0.79
0
1
1
1
1
0.71
0.79
1
1
0.29
1
1
1
1
1
1
1
1
1
0.36
1
1
0.79
0.79
1
1
1

1
0.07
0

Fraction of Time Since the First Prosecution of Insider Trading
0.29
0.21
0
0.36
1
1
0.21
0
0
1
0.21
0
0.43
1
0.29
0.21
0.36
0
0.07
0.33
0
1
0.21
0.64
0
0.79
0.21
0
0
0.36
0
0
0.64
0
0.83
0
1
0
0
0
1
0
0
0.07
0.5
0.64
0.29
0.71
0.43
0.25
1

Insider Trading Index
4.04
2.57
3.19
2.8
4.24
2.71
3.64
4.62
4.31
5.12
2.11
4.21
2.61
3.07
2.48
4.5
3.87
4.08
4.53
4.56
2.62
3.77
3.87
2.85
4.32
4.09
4.47
4.49
3.09
2.54
3.55
4.11
4.6
3.82
3.56
4.63
2.44
4.64
4.2
3.45
2.47
3.02
4.7
4.73
4.08
2.26

1
0
0

2.62
4.83
4.14

Insider Trading Index Rescaled by Sample Standard Deviation
4.79
3.05
3.78
3.32
5.03
3.22
4.32
5.48
5.11
6.08
2.5
5
3.09
3.64
2.94
5.34
4.59
4.84
5.37
5.41
3.1
4.47
4.59
3.38
5.13
4.85
5.3
5.32

Legal Corruption Index
4.6
1.17
1.21
1.74
3.3
1.21
3.03
4.59
4.72
3.42
1.36
3.4
1.05
1.59
1.22
2.98
1.56
2.98
3.1
5.53
1.17
1.45
2.96
1.48
2.39
3.96
2.62
5.03

3.67
3.01

1.05
1.08

4.21

1

4.88
5.46
4.53
4.22
5.49
2.9
5.51
4.98
4.09

5.29
5.19
2.89
2.02
4.6
8
1.4
4.3
2.46
2

2.93
3.58
5.58
5.61
4.84
2.68

1.05
1.16
3.26
3.17
3.06
1.14

3.1
5.73
4.91

1.71
5.53
2.51