103 Pages Posted: 4 Apr 2006
Date Written: March 2006
I re-code the "Antidirector Rights Index" (ADRI) of shareholder protection rules from La Porta et al. 1998 for 46 countries in 1997 and 2005 with the help of local lawyers. My emphasis is on consistent coding; I do not change the original variable definitions. Consistently coded ADRI values are neither distributed with significant differences between Common and Civil Law countries, nor predictive of stock market outcomes. The revision of the variable definitions in Djankov et al. 2005 salvages some of the original results, but reinforces severe endogeneity concerns regarding the index components that drive the remaining significant results. I review the other index components and conclude that the ADRI is unlikely to be a valid measure of shareholder protection. Results derived with the ADRI in the literature may have to be revisited. Along the way, I develop some general guidelines for consistent coding.
JEL Classification: G38, K22, P48
Suggested Citation: Suggested Citation
Spamann, Holger, On the Insignificance and/or Endogeneity of La Porta et al.'s 'Anti-Director Rights Index' under Consistent Coding (March 2006). Harvard Law School John M. Olin Center Discussion Paper No. 7; ECGI - Law Working Paper No. 67/2006. Available at SSRN: https://ssrn.com/abstract=894301 or http://dx.doi.org/10.2139/ssrn.894301
By Mark Roe
By John Armour