Rule of law. The data for China, Hungary, Poland were again provided by Lopez-de-Silanes. Table 1 in LLSV (1998) describes this variable as follows.
Assessment of the law and order tradition in the country produced by the country-risk rating agency International Country Risk (ICR).
Average of the months of April and October of the monthly index between 1982 and 1995.
Scale from 0 to 10, with lower scores for less tradition for law and order. (We [LLSV] changed the scale from its original range going from 0 to 6.)
Anti-director rights. Table 1 in LLSV (1998) describes this variable as follows.
An index aggregating the shareholder rights which we labeled as `yanti-director rights.a The index is formed by adding 1 when: (1) the country allows
shareholders to mail their proxy vote to the "rm; (2) shareholders are not required to deposit their shares prior to the General Shareholders'Meeting; (3)
cumulative voting or proportional representation of minorities in the board of directors is allowed; (4) an oppressed minorities mechanism is in place; (5)
the minimum percentage of share capital that entitles a shareholder to call for an Extraordinary Shareholders' Meeting is less than or equal to 10 percent
(the sample median); or (6) shareholders have preemptive rights that can only be waived by a shareholders' vote. The index ranges from 0 to 6.
Creditor rights. Table 1 in LLSV (1998) describes this variable as follows.
An index aggregating di!erent creditor rights. The index is formed by adding 1 when (1) the country imposes restrictions, such as creditors' consent or
minimum dividends to "le for reorganization; (2) secured creditors are able to gain possession of their security once the reorganization petition has been
approved (no automatic stay); (3) secured creditors are ranked "rst in the distribution of the proceeds that result from the disposition of the assets of
a bankrupt "rm; and (4) the debtor does not retain the administration of its property pending the resolution of the reorganization. The index ranges from
zero to four.
Accounting standards. Table 1 in LLSV (1998) describes this variable as follows.
Index created by examining and rating companies' 1990 annual reports on their inclusion or omission of 90 items.
These items fall into seven categories (general information, income statements, balance sheets, funds #ow statement, accounting standards, stock data,
and special items.) A minimum of three companies in each country were studied.
The companies represent a cross section of various industry groups; industrial companies represented 70 percent, and "nancial companies represented
the remaining 30 percent.
"LLSV 1998 is La Porta, Lopez-de-Silanes, Shleifer and Vishny (1998).
#IFC 1999 is the International Finance Corporation's (1999) Emerging Market Factbook.