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 Stock Market Volatility Volatility of Real GDP Growth Rate Cash Flow Risk
Argentina 21.19 6.23 0.84
Australia 7.71 1.72 0.43
Austria 7.84 1.18 1.24
Belgium 5.45 1.46 1.06
Brazil 18.23 3.36 1.39
Canada 4.97 2.11 0.53
Chile 8.11 2.15 0.31
China 14.56 3.03 0.55
Colombia 8.35 1.3 0.95
Czech 9.38 5.55
Denmark 5.44 1.38 0.52
Egypt 7.49 1.5
Finland 7.73 4 0.66
France 6.33 1.45 0.6
Germany 6.36 1.35 1.02
Greece 11.03 1.55 0.46
Hong Kong 9.34 3.17 0.4
Hungary 11.91 4.41 0.34
India 9.28 2.12 0.42
Indonesia 14.41 1.62 0.31
Ireland 7 3.12 0.32
Israel 6.85 2.14 0.39
Italy 7.64 1.35 0.81
Japan 7.49 1.91 0.36
Jordan 4.6 6.68
Korea 11.16 2.15 0.33
Malaysia 10.3 3.23 0.39
Mexico 14.03 4.21 0.5
Morocco 4.55 6.02
Netherland 4.58 1.03 0.35
Newzland 8.26 2.22 0.2
Nigeria 15.67 3.38
Norway 7.75 1.64 0.82
Pakistan 8.86 2.22 0.38
Peru 9.83 7.49 0.68
Philippines 11 3.78 0.51
Poland 17.65 5.66 0.31
Portugal 10.51 2.06 0.87
Russia 28.53 5.6
Saudi Arabria 4.34 4.13
Singapore 9.09 3.53 0.45
Slovakia 8.2 6.46
South Africa 9 2.17 0.27
Spain 7.42 1.82 0.77
Sri Lanka 8.97 1.56 0.2
Sweden 6.75 1.89 0.63
Switzerland 5.59 1.7 0.58
Taiwan 13.22 2.43 0.45
Thailand 11.76 3.37 0.44
Turkey 18.29 4.33 0.7
United Kingdom 5.62 2.09 0.36
United States 4.33 1.7 0.42
Venezuela 14.67 4.83 1
Zimbabwe 10.88 4.66
Leverage Ratio Billionaire Wealth/GDP Gini Coefficient Volatility of Exchange Rate
0.33 26.38 17.24
0.2 7.72 35.48 2.41
0.46 0 23.1 2.76
0.42 0 26.63 2.73
0.93 17.37 59.25 63.53
0.27 24.9 31.54 1.05
0.22 71.74 51.25 2.21
0.55 41.5 12.53
0.47 0 54.4 1.82
0.23 26.6 2.88
0.33 0 27.85 2.69
35 0.21
0.59 0 27.67 2.77
0.48 13.93 36.66 2.63
0.37 46.38 29.72 2.76
0.17 66.67 35.11 3.22
0.42 350.96 40.53 0.12
0.17 25.04 1.93
0.55 8.24 30.29 2.2
0.56 47.71 34.42 9.68
0.28 0 37.3 2.74
0.3 41.43 35.5 2.08
0.72 10.35 34.31 2.7
0.43 13.4 34.07 3.1
43.4 2.03
2.49 31.99 36.14 4
0.14 70 49.93 2.42
0.34 18.34 52.13 5.53
39.2 1.7
0.25 18.73 29.94 2.76
0.27 31.24 2.5
45 15.32
0.57 0 30.26 2.4
1 31.21 1.61
0.1 0 49.95 1.25
0.24 54.84 46.15 2.96
0.12 26.06 109.55
0.59 0 40.58 3.16
31 117.9
0.01
0.21 50.87 39 1.39
19.5 1.75
0.08 13.16 58.4 3.94
0.29 5.66 34.81 2.71
0.28 34.47 0.9
0.26 0 27.61 2.54
0.54 57.03 36.1 3.13
0.2 48.86 29.32 1.63
0.92 39.06 43.97 3.32
0.1 0 51 4.44
0.18 8.56 28.45 2.77
0.16 24.04 37.32 0
0.41 43.1 44.78 8.99
56.8 4.93
Volatility of Inflation Volatility of Fiscal Deficit/GDP Trade Openness: (Exports+Imports)/GDP
25.51 1.67 8.15
0.07 1.86 18.28
0.01 0.72 38.15
0.01 2.25 64.88
13.39 5.15 8.48
0.02 1.12 29.42
0.08 1.39 29.7
0.09 0.25 15.86
0.04 2.19 16.39
0.02 1.38 56.51
0.01 2.4 33.22
0.02 4.58 25.39
0.02 5.97 27.79
0.01 1.79 21.97
0.02 0.47 23.39
0.06 5.04 21.54
0.07 130.29
0.05 2.44 36.14
0.03 1.38 10.23
0.17 1.71 24.66
0.08 4 58.92
0.86 2.51 41.67
0.02 3.11 21.08
0.01 2.19 9.42
0.08 4.95 62.17
0.02 0.88 32.69
0.02 3.82 75.85
0.42 6.04 20.39
0.02 2.07 27.97
0.01 1.55 50.71
0 3.03 28.48
0.25 2.7 33.19
0.02 3.5 35.85
0.09 1.04 17.63
24.36 2.76 13.5
0.07 1.74 33.52
0.1 0.66 22.45
0.04 3.31 34.5
0.31 4.45 25.85
0 38.8
0.01 5.71 180.87
0.01 51.09
0.02 2.53 24.62
0.02 1.72 20.53
0.05 2.11 35.25
0.03 5.71 32
0.02 0.7 34.9
0 1.67
0.02 3.18 36.79
0.19 1.78 18.61
0.02 2.92 26.48
0.01 1.46 10.54
0.27 3.23 25.51
0.09 1.93 28.84
Stock Market Capitalization/GDP Stock Turnover/Market Capitalization Stock Exchange Age
1.6 34.99 144
52.07 41.9 139
6.99 86.05 227
38.1 197
9.74 44.35 108
49.41 44.45 120
28.36 9.67 105
0.54 205.67 8
2.92 8.98 70
14.89 41.03 127
27.15 41.1 79
5.02 27.82 108
29.06 86
25.43 172
22.88 131.25 413
6.63 30.01 122
127.6 43.65 107
1.51 29.06 134
8.64 40.87 123
0.28 39.85 86
15.59 24.5 205
12.43 48.25 45
16.17 35.3 190
133.87 40.45 120
36.91 20.04 20
121.47 42
67.21 43.4 25
7.52 41.04 104
2.01 8.05 69
49.05 60.7 298
30.23 22.7 128
4.2 1.25 38
14.6 62.35 179
6.39 28.71 51
3.25 34.39 47
11.3 26.31 71
0.19 105.04 181
14.57 32.59 173
0.05 15.24 4
40.85 15.6 14
93.72 28.7 68
7.94 109.42 7
143.02 10.26 111
26.43 167
6.75 10.05 102
55.02 39.65 135
75.4 47 60
37
14.29 77.53 24
1.25 83.59 132
92.29 35.05 225
57.26 73.1 206
3.02 22.46 158
9.91 6.82 102
Log of Number of Listed Companies Log of GDP per capita
4.95 8.91
7.07 9.8
4.64 10.2
4.93 10.15
6.3 8.36
7.18 9.81
5.68 8.07
6.48 6.05
5.24 7.5
6.84 8.54
5.47 10.37
6.47 6.82
4.58 10.07
6.53 10.13
6.54 10.28
5.42 9.26
6.41 9.88
3.85 8.39
8.9 5.73
5.59 6.69
4.38 9.46
6.47 9.52
5.48 9.78
7.11 10.56
4.77 7.34
6.64 8.97
6.5 8.1
5.28 8.04
3.87 7.12
5.34 10.09
5.16 9.61
5.21 5.4
5.18 10.31
6.66 6.11
5.48 7.72
5.39 6.95
4.73 7.98
5.03 9.15
4.95 7.97
4.24 8.93
5.57 10.03
6.74 8.16
6.45 8.14
5.91 9.48
5.47 6.44
5.47 10.12
5.37 10.73

6.09 7.65
5.49 7.87
7.71 9.78
9.07 10.15
4.49 8.14
4.16 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 Insider Trading Index
0.29 4.04
0.21 2.57
0 3.19
0.36 2.8
1 4.24
1 2.71
0.21 3.64
0 4.62
0 4.31
1 5.12
0.21 2.11
0 4.21
0.43 2.61
1 3.07
0.29 2.48
0.21 4.5
0.36 3.87
0 4.08
0.07 4.53
0.33 4.56
0 2.62
1 3.77
0.21 3.87
0.64 2.85
0 4.32
0.79 4.09
0.21 4.47
0 4.49
0
0.36 3.09
0 2.54
0
0.64 3.55
0
0.83 4.11
0 4.6
1 3.82
0 3.56
0 4.63
0
1 2.44
0 4.64
0 4.2
0.07 3.45
0.5
0.64 2.47
0.29 3.02
0.71 4.7
0.43 4.73
0.25 4.08
1 2.26
1 2.62
0 4.83
0 4.14
Insider Trading Index Rescaled by Sample Standard Deviation Legal Corruption Index
4.79 4.6
3.05 1.17
3.78 1.21
3.32 1.74
5.03 3.3
3.22 1.21
4.32 3.03
5.48 4.59
5.11 4.72
6.08 3.42
2.5 1.36
5 3.4
3.09 1.05
3.64 1.59
2.94 1.22
5.34 2.98
4.59 1.56
4.84 2.98
5.37 3.1
5.41 5.53
3.1 1.17
4.47 1.45
4.59 2.96
3.38 1.48
5.13 2.39
4.85 3.96
5.3 2.62
5.32 5.03

3.67 1.05
3.01 1.08

4.21 1

4.88 5.29
5.46 5.19
4.53 2.89
4.22 2.02
5.49 4.6
8
2.9 1.4
5.51 4.3
4.98 2.46
4.09 2

2.93 1.05
3.58 1.16
5.58 3.26
5.61 3.17
4.84 3.06
2.68 1.14
 3.1 1.71
5.73 5.53
4.91 2.51