# **A.2. Financial System Variables, (Tables 3-B and 3-C)**

|**Variables**|**Definition**|**Original Source**|
|---|---|---|
|Bank Credit|Ratio of total credit deposited into banks from private<br>sectors /GDP.|IFS, WDI, and country specific<br>publications|
|(Total) value traded|Ratio of domestic equity traded on domestic exchanges<br>/GDP.|IFS, WDI, EMFB, and country<br>specific publications|
|Market<br>capitalization|Ratio of domestic equities listed on domestic<br>exchanges/GDP.|Int’l Financial Statistics (IFS),<br>World Development Indicators<br>(WDI), Emerging Markets<br>Factbook (EMFB), and country<br>specific publications|
|Overhead cost|Overhead cost divided by total bank system assets.|Levine’s calculations (2002)|
|Structure- size|Log(Market capitalization/Bank credit); measure size of<br>markets and banks.|Levine (2002)|
|Structure-activity|Log(Value traded/Bank credit); measure size/trading<br>volume of markets and banks.|Levine (2002)|
|Structure-efficiency|Log(Market capitalization ratio × Overhead cost ratio);<br>measures relative efficiency of markets vs. banks.|Levine (2002)|
|Structure regulation|Sum of the four categories in regulatory restriction.|National regulatory authorities|
|Regulatory<br>restriction|The degree to which commercial banks are allowed to<br>engage in security, firm operation, insurance, and real<br>estate: 1- unrestricted; 2-permit to conduct through<br>subsidiary; 3-full range not permitted in subsidiaries; and<br>4-strictly prohibited.|National regulatory authorities|
|Finance-size|Log (Market capitalization ratio + Private credit ratio)|Levine (2002)|
|Finance-activity|Log (Total value traded ratio × Private credit ratio)|Levine (2002)|
|Finance-efficiency|Log (Total value traded ratio/Overhead cost)|Levine(2002)|

Secondary source: Demirgüç-Kunt and Levine (2002), and Levine (2002).

# **A.3. External Financing Variables, (Table 3-B and Figure 2)**

|**Variable**|**Description**|**Sources**|
|---|---|---|
|External cap<br>/ GNP|The ratio of the stock market capitalization held by minorities to<br>GNP in 1994. The first variable is computed as the product of the<br>aggregate stock market capitalization and the average percentage<br>of common shares not owned by the top three shareholders in the<br>ten largest nonfinancial, privately- owned domestic firms in a<br>given country. A firm is considered privately owned if the State is<br>not a known shareholder.|Moodys International,<br>CIFAR, EXTEL,<br>WorldScope, 20-Fs,<br>PriceWaterhouse, and<br>various country sources|
|Domestic<br>firms / Pop|Ratio of the number of domestic firms listed in a given country to<br>its population (in millions) in 1994.|Emerging Market Factbook<br>and World Development<br>Report (WDR) 1996.|
|IPOs/Pop|Ratio of the number of initial public offerings of equity in a given<br>country to its population (in millions) for the period 1995:7-<br>1996:6.|SDC, AsiaMoney,<br>LatinFinance, GT Guide to<br>World Equity Markets, and<br>WDR 1996.|
|Debt/GNP|Ratio of the sum of bank debt of the private sector and outstanding<br>nonfinancial bonds to GNP in 1994, or last available.|International Financial<br>Statistics, World<br>Bondmarket Factbook.|
|GDP growth|Average annual percent growth of per capita gross domestic<br>product for the period 1970-1993.|WDR 1995.|
|Market cap/|The median ratio of the stock market capitalization held by|WorldScope.|

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