New index predicts stock market outcomes based on legal protection against self-dealing.
The article introduces a new way to measure how well laws protect small shareholders from being taken advantage of by company insiders. This measure, called the anti-self-dealing index, looks at legal rules in 72 countries in 2003. It focuses on how well laws enforce things like disclosure, approval, and lawsuits related to self-dealing transactions. The index can predict how well stock markets will do, and it works better than a previous measure of shareholder rights.