Data collects from the Global Vantage database for 1998 which contains financial

information for 16,157 companies across 80 countries. Combining with the shareholder
rights measurement of LLSV (1998), Dittmar, Mahrt-Smith and Servaes use the sample of
11,591 companies of 45 countries for this analysis. The cash ratio for the study is defined as
the cash and equivalents divided by net assets, where net assets exclude cash and cash
equivalents. The dependent variable of all models in this analysis is the logarithm of that
cash ratio as Opler et al (1999) work.

According the summary statistics table, countries are divided into two groups as the LLSV’s
shareholder rights variable was built. If the shareholder rights variable equal to 3, 4, 5 then
that country belongs to high shareholder rights group, and that variable equal to 0, 1, 2 then
that country in low shareholder rights group. Dittmar, Mahrt-Smith and Servaes also use
book value of assets variable instead for firm size. As you know, both transaction costs and
precautionary motive involve investment opportunities and the market-to-book ratio
substitute for investment opportunities. Dittmar, Mahrt-Smith and Servaes work with net
working capital to net assets ratio as a control variable and they use that ratio to investigate
with more liquidity assets held by the company can be complement or substitute for cash
level.

In term of Pooled cross-country regression table which use the reduced form model, Dittmar,
Mahrt-Smith and Servaes explain firm cash level. All regression in this table contains
industry (two-digit SIC code main classifications) dummy variables and the numbers in
brackets are p-values based on robust standard errors. Models in this table provides
regression models with the level of shareholder rights variable, common law dummy, the
external capital to GNP ratio and the private credit to GDP ratio, respectively.

Moreover, Dittmar, Mahrt-Smith and Servaes concentrate on 4 issues to conduct some

additional tests which estimates random effects model with random affects for country or
industry pair and on countries’ means.