paper applies a Bayesian model averaging algorithm to systematically evaluate
the “law matters” literature and finds that the positive cross-country
relationship between anti-self-dealing rules and stock market development
proposed by Djankov, La Porta, Lopez-de-Silanes, and Sheifer (2008, Journal of
Financial Economics 88: 430-465) is fragile. In contrast, proxies for
information disclosure, political power of incumbents and economic development
are found to have strong predictive power for stock market outcome variables.
Finally, variant sets of variables are shown to predict stock market
development, which rejects the “one-size-fits-all” specification employed in
previous macro law and finance studies.