Corruption’s impact on foreign portfolio investment
Pankaj K. Jain,
Emre Kuvvet and
Michael S. Pagano
International Business Review, 2017, vol. 26, issue 1, 23-35
Abstract:
Corruption has significant effects on a nation’s financial markets through its adverse impact on foreign portfolio investment (FPI). Yet, the effects of corruption on FPI are nonlinear and reverse J-shaped, with intermediate levels of corruption yielding the most negative effects. Highly transparent nations, where a “level playing field” exists between foreign and local investors due to lack of information asymmetries related to corruption, attract the most foreign investment. However, at the margin, very corrupt countries attract more investment than moderately corrupt countries because a “perverse level playing field” in the former countries may put foreigners and locals on an even footing in terms of resolving asymmetric information problems. This nonlinear pattern is consistent with foreign investors’ desire to trade in markets where they are not at an informational disadvantage.
Keywords: Corruption; Foreign portfolio investment; Trading; International financial markets (search for similar items in EconPapers)
JEL-codes: G19 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0969593116300658
Full text for ScienceDirect subscribers only
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:eee:iburev:v:26:y:2017:i:1:p:23-35
Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/journaldescription.cws_home/133/bibliographic
http://www.elsevier. ... me/133/bibliographic
DOI: 10.1016/j.ibusrev.2016.05.004
Access Statistics for this article
International Business Review is currently edited by P. Ghauri
More articles in International Business Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().