Law matters?: a Bayesian analysis of the cross-country relationship between anti-self-dealing rules and stock market outcomes

Abstract

This article examines robustness of the cross-country relationship between anti-self-dealing rules and proxies for stock market development proposed by Djankov et al. (2008) using the weighted-average least squares estimator. The claimed relationship is not robust considering the model uncertainty problem.

Keywords:

• anti-self-dealing rules
• stock market development
• Bayesian analysis
• weighted-average least squares estimator

JEL Classification:

• G38
• K22
• C11

Notes

¹ The ‘anti-director rights index’ involved in the first two articles is re-examined by Spamann (2010), which finds significant coding errors. After these errors are corrected, the empirical relationships are no longer significant.

² See Leamer (1983) for discussion about the terminologies for the focus, free and doubtful variables.