Appendix A
Variable definitions
Dependent Variable: Comovement
Comovement is a measure of market-wide information arriving to the securities market based on R2 from the expanded market model regression,
$$ {r}_{i,t}={\alpha}_j+{\beta}_{1,t}{r}_{m,j,t- 1}+{\beta}_{2,t}\left({r}_{us,t- 1}+{e}_{j,t- 1}\right)+{\beta}_{3,t}{r}_{m,j,t}+{\beta}_{4,t}\left({r}_{us,t}+{e}_{j,t}\right)+{\beta}_{5,t}{r}_{m,j,t+ 1}+{\beta}_{6,t}\left({r}_{us,t+ 1}+{e}_{j,t+ 1}\right)+{\varepsilon}_{j,t}. $$
Specifically, Comovement = ln(R2/(1–R2)).
Institutional Ownership Variables
IO_TOTAL is total institutional ownership, as the sum of shareholdings of all institutions for a stock divided by its total number of shares outstanding.
IO_DOM is domestic institutional ownership, as the sum of shareholdings of all institutions headquartered in the same country where a stock is listed divided by its total number of shares outstanding.
IO_FOR is foreign institutional ownership, as the sum of shareholdings of all institutions headquartered in foreign countries, i.e., countries different from the country in which a stock is listed, divided by its total number of shares outstanding.
IO_FOR_COMMON is the sum of the shareholdings of all institutions headquartered in common-law countries divided by the total number of shares outstanding.
IO_FOR_CIVIL is the sum of the shareholdings of all institutions headquartered in civil-law countries divided by the total number of shares outstanding.
IO_FOR_HASD is the sum of the shareholdings of all institutions headquartered in countries with above-median anti-self-dealing index scores divided by the total number of shares outstanding.
IO_FOR_LASD is the sum of the shareholdings of all institutions headquartered in countries with below-median anti-self-dealing index scores divided by the total number of shares outstanding.
IO_DOM_HIGH is domestic high-stake institutional ownership, as the sum of the shareholdings by institutions headquartered in the same countries, with more than 5% shareholdings in a stock divided by its total number of shares outstanding.
IO_DOM_LOW is domestic low-stake institutional ownership, as the sum of the shareholdings by institutions headquartered in the same country, with less than 1% shareholdings in a stock divided by its total number of shares outstanding.
IO_FOR_HIGH is foreign high-stake institutional ownership, as the sum of the shareholdings by institutions headquartered in foreign countries, with more than 5% shareholdings in a stock divided by its total number of shares outstanding.
IO_FOR_LOW is foreign low-stake institutional ownership, as the sum of the shareholdings by institutions headquartered in foreign countries, with less than 1% shareholdings in a stock divided by its total number of shares outstanding.
IO_FOR_COMMON_HIGH is common-law, high-stake institutional ownership, as the sum of the shareholdings by institutions headquartered in common law countries, with more than 5% shareholdings in a stock divided by its total number of shares outstanding.
IO_FOR_COMMON_LOW is common-law, low-stake institutional ownership, as the sum of the shareholdings by institutions headquartered in common law countries, with less than 1% shareholdings in a stock divided by its total number of shares outstanding.
IO_FOR_CIVIL_HIGH is civil-law, high-stake institutional ownership, as the sum of the shareholdings by institutions headquartered in civil law countries, with more than 5% shareholdings in a stock divided by its total number of shares outstanding.
IO_FOR_CIVIL_LOW is civil-law low-stake institutional ownership, as the sum of the shareholdings by institutions headquartered in civil law countries, with less than 1% shareholdings in a stock divided by its total number of shares outstanding.
IO_FOR_HASD_HIGH is high anti-self-dealing index, high-stake institutional ownership, as the sum of the shareholdings by institutions headquartered in countries with above median anti-self-dealing index scores, with more than 5% shareholdings in a stock divided by its total number of shares outstanding.
IO_FOR_HASD_LOW is high anti-self-dealing index, low-stake institutional ownership, as the sum of the shareholdings by institutions headquartered in countries with above median anti-self-dealing index scores, with less than 1% shareholdings in a stock divided by its total number of shares outstanding.
IO_FOR_LASD_HIGH is low anti-self-dealing index, high-stake institutional ownership, as the sum of the shareholdings by institutions headquartered in countries with below median anti-self-dealing index scores, with more than 5% shareholdings in a stock divided by its total number of shares outstanding.
IO_FOR_LASD_LOW is low anti-self-dealing index, low-stake institutional ownership, as the sum of the shareholdings by institutions headquartered in countries with below median anti-self-dealing index scores, with less than 1% shareholdings in a stock divided by its total number of shares outstanding.
Firm-specific Control Variables
SIZE is the natural log of market capitalization at the end of the fiscal year (in millions of U.S. dollars).
MB is the ratio of market value of equity to the book value of equity at the end of the fiscal year.
LEV is the book value of long-term debt scaled by the sum of market value of equity and book value of long-term debt at the end of the fiscal year.
ACCR is the absolute value of total accounting accruals scaled by total operating cash flows.
ROA is the income before extraordinary items divided by the beginning-of-fiscal year total assets.
DIVERS is the number of business segments.
HERF is the revenue-based Herfindahl index of industry-level concentration, calculated with the revenues of all firms within each country.
NIND is the natural log of the number of firms in each industry used to calculate HERF.
NAF is the natural log of number of analysts issuing forecasts for the firm during the fiscal year.
TURN is annual share turnover over the current year, where share turnover is calculated as the average monthly trading volume divided by the total number of shares outstanding during the month.
IndustryDummies are industry indicators based on two-digit SIC codes.
DP is dividend yield, calculated as cash dividend divided by share price.
PRICE is the natural log of per share stock price (in U.S. dollars).
VOLA is the volatility estimated as the standard deviation of monthly returns over the previous two fiscal years.
AGE is firm age, calculated as the log of the number of months since the first return appears in Datastream.
RELt-2, t-1 is cumulative gross returns over the past 3 months.
RELt-12, t-3 is cumulative gross returns over the 9 months preceding the beginning of the filing quarter.
FSALE is the foreign sales divided by total sales at the end of the fiscal year.
Country-Level Governance
Legal regime: The legal origin of the company law or commercial code of each country. Equals one if the origin is common law, and zero otherwise. Source: La Porta et al. (1998).
Anti-self-dealing index: Average of ex ante and ex post private control of self-dealing. Index of ex ante control of self-dealing transactions is based on the average of approval by disinterested shareholders and ex ante disclosure. Index of ex post control over self-dealing transactions is based on the average of disclosure in periodic filings and ease of proving wrongdoing. First principal component of: (1) approval by disinterested shareholders; (2) disclosures by Buyer; (3) disclosures by the insider self-dealer; (4) independent review; (5) each of the elements in the index of disclosure in periodic filings; (6) standing to sue; (7) rescission; (8) ease of holding the insider self-dealer liable; (9) ease of holding the approving body liable; and (10) access to evidence. The index ranges from zero (weak private enforcement) to one (strong private enforcement). Source: Djankov et al. (2008).