These restrictions on the sample will have several effects. First, the model will appear
to ``fit'' better than it would fit unrestricted data. That is, the explanatory power of book
value and of residual earnings information in the sample is likely to be greater than for an
unrestricted sample. Second, the samples across the six countries will be more homogeneous
and the effects of different business cycles in the six countries will be reduced.
This should allow a better focus on the effects of accounting differences. Table 5 shows the
countries and number of firm-years.