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Table I. Data
This table presents the data used in figures 1 and 2. Investor stock market participation rates are from
1999 Share Ownership Survey by the World Federation of Exchanges, Guiso et al. (2003), June 2002
Factbook published by the Deutsches Aktieninstitut, Marktforschungsinstitut Demoscope, Comissão do
Mercado de Valores Mobilliáros, and Goodbody Stockbrokers. Antidirector rights index is from La
Porta et al. (1998). The index ranges from 0 to 5 and higher numbers indicate better shareholder
protection. Stock market capitalization and GDP numbers are from Demirgüc-Kunt and Levine (2001).
Percentages for closely held stocks are from Dahlquist et al. (2003). The estimate for foreign equity
holdings by domestic investors relative to their stock market wealth uses data for foreign equity assets
and liabilities from Lane and Milesi-Ferretti (2001).
Country
Australia
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Greece
Hong Kong
India
Ireland
Italy
Japan
Netherlands
New Zealand
Norway
Portugal
Singapore
Sri Lanka
Sweden
Switzerland
Taiwan
Turkey
UK
US
Investor
Stock
Market
Participation
Rates
0.404
0.056
0.05
0.25
0.28
0.187
0.15
0.089
0.102
0.138
0.033
0.17
0.07
0.297
0.14
0.31
0.21
0.145
0.083
0.023
0.22
0.176
0.125
0.012
0.3
0.26
Antidirector
Rights
Index
Stock Market
Capitalization
to GDP
Percentage
Of Market
Capitalization
Closely Held
4
2
0
5
2
3
3
1
2
5
5
4
1
4
2
4
4
3
4
3
3
2
3
2
5
5
0.431048
0.07132
0.258044
0.455363
0.223052
0.184352
0.197739
0.186379
0.081025
1.28219
0.132123
0.265648
0.118725
0.730083
0.409205
0.404699
0.151912
0.077534
1.23063
0.129598
0.380937
0.705946
0.4886
0.061429
0.762871
0.581779
24.85
54.85
47.14
48.82
25.1
23.49
37.98
44.74
75.18
42.73
40.32
13.06
37.54
38.38
37.74
77.48
41.07
35.04
57.1
19.15
20.99
25.73
22.26
70.86
9.93
7.94
Foreign
Equity
Holdings by
Domestic
Investors
0.009168
0.0890267
0.0799656
0.0255211
0.0362815
0.009845
0.0205537
0.0489564
0.0205104
0.0058784
0.0393687
0.0088756
0.0089229
0.029502
0.0566265
0.0149091
0.0051064
Table II. Institutional investors’ holdings of foreign equity.
The dependent variable is the logarithm of (aggregate) proportion of equity relative to total holdings of
equity that institutional investors incorporated in the origin country invests in the target country as of
December 31, 2002 or June 30, 2003. Private enforcement index is from La Porta et al. (2003).
Shareholder rights (measured by the antidirector index) is from La Porta et al. (1998). Law and order is
an indicator of law and order tradition, constructed by the International Country Risk Guide. Market
capitalization weight is the logarithm of the target country’s stock market capitalization divided by the
world stock market capitalization as of December 31, 2002 using data from World Federation of
Exchanges. Free float market capitalization weight is the free-float of target country relative to freefloat world stock market capitalization as of December 31, 2002 using the proportion of closely held
shares as in Dahlquist et al. (2003). Market capitalization relative to GDP is the stock market
capitalization divided by the GDP in the origin countries, divided by 1,000,000. Logarithm of distance
measures the distance between the domicile of the main stock exchange in the origin country and the
domicile of the main stock exchange in the target country. T-statistics are in parentheses. ***, **, *
denote that a coefficient is significant at the 1%, 5%, and 10% levels, respectively. The standard errors
have been computed using the Huber-White estimator of the variance, which produces consistent
standard errors even in presence of heteroskedasticity. Observations have been clustered by country of
origin.
Explanatory variable
Private enforcement - target
Private enforcement – origin
(1)
3.68***
(9.56)
-1.31***
(-3.54)
Shareholder rights – target
(2)
(3)
(5)
0.96***
(4.05)
-1.38***
(-5.24)
-0.17***
(-4.71)
0.05
(1.36)
1.30***
(29.05)
-6.47***
(-3.40)
7.75***
(9.40)
-0.69***
(-15.28)
964
0.68
1.30***
(29.43)
-5.86***
(-3.12)
7.85***
(9.66)
-0.67***
(-14.26)
964
0.69
0.17***
(2.63)
-0.13**
(-2.34)
Shareholder rights – origin
Law and order– target
1.09***
(19.73)
-0.161*
(-1.88)
Law and order– origin
Market cap. weight – target
Free-float mkt. cap weight – target
Mkt. cap relative to GDP - origin
Log. distance
Number of observations
R-squared
(4)
0.44**
(2.03)
-1.07***
(-5.05)
985
0.10
1173
0.01
1063
0.14
Figure I. Antidirector Rights vs. Investor Participation
45,00%
Australia
Investor Participation
40,00%
35,00%
New Zealand
Japan
30,00%
Denmark
UK
US
Canada
25,00%
Sweden
20,00%
15,00%
10,00%
Switzerland
Finland
Netherlands
France
Portugal
Taiwan
Germany
Italy
5,00%
Hong Kong
Singapore
Austria
Belgium
Sri Lanka
Turkey
1
Ireland
Greece
0,00%
0
Norway
2
3
Antidirector Rights
India
4
5
6
Figure II. Participation Rates, Foreign Equity Holdings and Antidirector Rights
Participation Rates
Foreign Holdings
.3
.2
.1
0
1
2
3
Antidirector Rights
4
5
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