| Variables | Variables definitions and data sources |
| Definition | |
| Investment (I/K) | Investment spending divided by total assets (K). Source: Datastream/Wordscope. |
| Return (R) | The fiscal-year-end adjusted share price, plus the adjusted dividends, all divided by the adjusted price at the end of the previous fiscal year. Source: Datastream/Wordscope. |
| Number of analysts (NA) | The number of analysts who issued one year-ahead earnings forecasts for firm i during year t. Source: I/B/E/S. |
| Nabis | The average and median number of analysts when we drop observations with zero analyst coverage. Source: I/B/E/S. |
| Future return (Rt + 3) | The buy-and-hold return for the three-year period following the current year (for years t + 1, t + 2 and t + 3). Source: Datastream/Wordscope. |
| Cash flow (CF/K) | The sum of income before extraordinary items and depreciation net of cash dividends, divided by total assets. Source: Datastream/Wordscope. |
| Size | The logarithm of the firm’s market capitalization. Source: Datastream/Wordscope. |
| Market-to-book (M/B) | The firm’s market to book ratio. Source: Datastream/Wordscope. |
| Anti-director rights index (DRI) | Represents an index that proxies the level of shareholders’ protection. It summarizes the degree to which securities laws protect the rights of investors and address corporate self-dealing. The index covers the following six areas: 1) vote by mail; 2) shares not deposited; 3) cumulative voting; 4) oppressed minority; 5) pre-emptive rights; and 6) capital to call a meeting. Source: Djankov et al.’s (2008). |
| Corruption (CO) | Represents an index of the level of corruption in a nation. The higher the level of corruption in a country, the lower is the index score. The latter ranges from 0 to 100 with 0 indicating the highest level of corruption. The scores of such index are derived primarily from Transparency International Corruption Perception Index (CPI). The corruption index is time varying. Source: Heritage foundation and the Wall Street Journal. |
| Press freedom (PF) | Measures the freedom of the press. Such index is time varying and ranges from 0 (free press) to 100 (no free press). Source: Freedom House. |
| Political rights (PR) | Represents an index that rates the level of democracy and freedom for each country on 1 to 7 scale. Three subcategories, drawn from the universal declaration of human rights, represent the fundamental components of this index: 1) electoral process; 2) political pluralism and participation; 3) functioning of government. Countries whose ratings average 1 to 2.5 are considered free, 3 to 5 partly free, and 5.5 to 7 note free. |
| Gross domestic product (GDP) | The country’s gross domestic product per capita. Source: World Bank. |