This table presents the balanced panel regression results where the dependent variable is the dividend yield on an index. Panel A reports the theoretical specification of the model and Panel B presents the model with the use of legal origins dummies. D1 has a value of 1 if a country is of Common law origins and 0 if its origins are Civil law. D2 has a value of 1 if a country has Civil law origins and 0 if it is Common law. Column 1 presents the baseline specification and columns 2 - 7 present the results where each of the governance indicators has been introduced individually into the first baseline model (B1). The governance indicators are further classified according to the governance cluster they are constituents of, with three distinct clusters reported. Instrumental variables are used to control for the effects of measurement errors in the first stage estimation of world betas using SUR. Columns 8 - 11 present the results for the adjusted specification with the Civil law (D1) and Common law (D2) dummy variables. All regressors are divided by the standard error of the governance point estimates. P-values are reported in parentheses.

Panel A

Panel B

Expected

Sign

Cluster 1

Cluster 2

Cluster 3

(1) B1

(2) Gi = VA

(3) Gi = PS

(4) Gi = GE

(5) Gi = RQ

(6) Gi = RL

(7) Gi = CC

(8) B2

(9) Gi = VA

(10) Gi = RQ

(11) Gi = CC

G_i

(+)

-

1.0385⁺

0.4328^*

0.4250^{^}

0.8947⁺

0.4047

0.3708^{^}

-

-

-

-

(0.0061)

(0.0696)

(0.0338)

(0.0013)

(0.1435)

(0.0476)

IR

(+)

0.1047⁺

0.1872⁺

0.1841⁺

0.1604⁺

0.1998⁺

0.1667⁺

0.1647⁺

0.1046^{^}

0.1561⁺

0.1822⁺

0.1358⁺

(0.0023)

(0.0000)

(0.0008)

(0.0001)

(0.0000)

(0.0038)

(0.0000)

(0.0101)

(0.0018)

(0.0001)

(0.0029)

β^w

(?)

0.0113

0.0019

0.0514

0.0347

0.1317

0.0579

−0.0305

-

-

-

-

(0.9737)

(0.9949)

(0.8676)

(0.9076)

(0.6475)

(0.8603)

(0.9202)

g^D

(-)

0.4722

0.4878

0.5512

0.6929

0.5543

0.6651^*

0.5903

0.4696

0.6109

0.5818

0.7435

(0.2558)

(0.2138)

(0.1582)

(0.0642)

(0.1405)

(0.0801)

(0.1395)

(0.2790)

(0.1316)

(0.1458)

(0.0684)

DTP

(+)

1.4913^{^}

0.7117

0.7282

0.9378

0.7221

0.8243

0.8895

1.4959⁺

0.6675

0.7718

0.8207

(0.0214)

(0.2665)

(0.2598)

(0.1144)

(0.2029)

(0.1944)

(0.1286)

(0.0072)

(0.2306)

(0.1471)

(0.1396)

D1 × G_i

(+)

-

-

-

-

-

-

-

-

1.2199⁺

0.9342⁺

0.4789⁺

(0.0016)

(0.0002)

(0.0096)

D2 × G_i

(+)

-

-

-

-

-

-

-

-

0.8797^{^}

0.7133⁺

0.1754

(0.0205)

(0.0092)

(0.3556)

Hausman

9.1249^{^}

2.3904

21.6882⁺

17.4067⁺

4.4308

1.5272

0.0000

0.9485

4.5009

5.0939

3.8815

Test

(0.0104)

(0.1221)

(0.0000)

(0.0000)

(0.1091)

(0.4660)

(1.0000)

(0.6224)

(0.2122)

(0.1651)

(0.2746)

Adj. R²

0.2458

0.4585

0.3897

0.4757

0.5568

0.4265

0.3611

0.2551

0.4940

0.5687

0.4212