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Data And Method, Laporta's Legal Environment Database, And Capital Iq

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Data and Method

I use five datasets: Worldscope, Capital IQ, ADR database, Laporta’s legal environment database, and Hofstede’s national culture indexes. In this work, I use Worldscope to obtain data on a firm’s financial information and capital IQ to find the information on CEO turnover. Through this research, I found the list of cross-listed firms at the Bank of New York and Citibank’s ADR directory. I have three measures for cross listing. ADR contains all cross-listing’s in U.S. with the high ADR containing cross listings in the NASDAQ, NYSE. and AMEX. Capital dummy contains those ADRs where capital was raised. Canadian companies listed on U.S. exchanges are all considered High ADR. I merge my data from the Worldscope, Capital IQ, and …show more content…

Size is the lagged logarithm of Total Asset in U.S. dollar. Performance is net income over total Asset, both lagged and in U.S. dollar.
Power distance index (PDI), as Geert Hofstede explains, is “this dimension expresses the degree to which the less powerful members of a society accept and expect that power is distributed unequally.” Power distance index dummy is equal to 1 if PDI is greater than U.S. PDI, otherwise it is zero. I expect the PDI to have a negative significant coefficient in model 1 and I expect a negative coefficient for the interaction term for countries with a higher PDI than the U.S. and a positive coefficient for the interaction term for firms from countries with lower PDI than the U.S.
Long Term Orientation Index measures whether people in a country are focused on a long-time or short-term horizon. Hofstede explains, “in the business context and in our country comparison tool this dimension is related to as "(short term) normative versus (long term) pragmatic" (PRA).” The U.S. LTO dummy is equal to 1 if the LTO is greater than U.S. LTO or is equal to zero otherwise. I expect LTO to have a negative significant coefficient in model 1. In model 2, I expect a negative coefficient of the interaction term for countries with higher LTO than the U.S. and a positive coefficient of the interaction term for firms from countries with a lower LTO than the U.S.
Civil/Common dummy is equal to 1 if the country’s legal system is based on the civil

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