Exploring the role of corruption and money laundering (ML) on bank’s loan portfolio quality: a cross-country investigation

Nadir Hussain, Salman Masood Sheikh and Ijaz Hussain Shah

Journal of Financial Regulation and Compliance, 2021, vol. 30, issue 3, 265-281

Abstract: Purpose - Corruption and money laundering (ML) are severe concerns for both developing and developed countries. According to international organizations, such as Transparency International, the Basel Institute on Governance and the International Country Risk Guide, corruption and ML exist in every country. This research aims to investigate the impact of corruption and ML on the loan portfolio quality of banks. Design/methodology/approach - From 2013 to 2019, this study used the panel data of 132 countries, including 87 highly corrupt and 45 least corrupt countries: the fixed effect and random effect econometric regression techniques for data analysis. Additionally, this study used the generalized methods of moment technique to check the result’s robustness. Findings - This study shows that corruption and ML have diverse relationships with non-performing loans in highly corrupt and low corrupt countries. It is potentially because of the differences in the regulatory structure of a highly corrupt and least corrupt environment. Originality/value - To the best of the authors’ knowledge, this study is the first attempt that provides a unique perspective on corruption, ML and its effect on the loan’s portfolio quality of banks. Furthermore, this study suggests that governments in highly corrupt environments develop robust anti-corruption and anti-ML regulations.

Keywords: Corruption; Money laundering; Non-performing loans; Random effect; Fixed effect; C33; D73; G2; G21; G28; G32 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:jfrc-10-2021-0086

DOI: 10.1108/JFRC-10-2021-0086

Access Statistics for this article

Journal of Financial Regulation and Compliance is currently edited by Prof John Ashton

More articles in Journal of Financial Regulation and Compliance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().