An Interval Variables Approach to Address Measurement Uncertainty in Governance Indicators

University of Verona - Department of Economics Working Paper No. 2/2018

22 Pages Posted: 14 Feb 2018

See all articles by Carlo Drago

Carlo Drago

Università degli Studi "Niccolò Cusano"

Roberto Ricciuti

University of Verona - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: February 2, 2018

Abstract

Many variables in governance are measured with uncertainty. This paper addresses this problem, showing that interval variables are a suitable way to handle it, providing an application in corporate governance. We build two constructs, one for Investor protection and the other for Constraints on shareholders based on the original dataset by La Porta et al. (1998) and we find that for very low levels of investor protection, constraints are a suitable way to provide some form of safeguard. We also provide evidence for the theoretical claim that investor protection and constraints on shareholders work as substitutes under specific circumstances.

Keywords: Corporate Governance, Measurement, Interval Data, Latent Variables

JEL Classification: C34

Suggested Citation

Drago, Carlo and Ricciuti, Roberto, An Interval Variables Approach to Address Measurement Uncertainty in Governance Indicators (February 2, 2018). University of Verona - Department of Economics Working Paper No. 2/2018 , Available at SSRN: https://ssrn.com/abstract=3116886 or http://dx.doi.org/10.2139/ssrn.3116886

Carlo Drago (Contact Author)

Università degli Studi "Niccolò Cusano" ( email )

Via Don Carlo Gnocchi, 3
Rome, 00166
Italy

Roberto Ricciuti

University of Verona - Department of Economics ( email )

Via dell'Artigliere, 8
37129 Verona
Italy

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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