Corruption and corporate risk-taking: evidence from emerging markets

Quoc Trung Tran

International Journal of Emerging Markets, 2020, vol. 17, issue 5, 1238-1255

Abstract: Purpose - This paper investigates the relationship between corruption and corporate risk-taking in emerging markets where corruption is considered as “public enemy number one.” Design/methodology/approach - The study measures corruption based on Corruption Control Index annually published by World Bank and examines how corruption affects corporate risk-taking in emerging markets covered in MSCI Emerging Market Index. Findings - With a sample of 75,338 observations from 8,326 firms across 20 emerging stock markets during the period 2005–2016, the author finds that corruption negatively affects corporate risk-taking. Robustness checks with a reduced sample without China and India, alternatives of corruption measures, various measures of risk-taking and Generalized method of moments (GMM) estimator also show consistent results. Moreover, additional analysis shows that information disclosure mitigates the effect of corruption on risk-taking. Originality/value - The extant literature implies that corruption may decrease corporate risk-taking behavior through two channels including operational cost and debt financing cost.

Keywords: Corruption; Emerging markets; Risk-taking (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoemp:ijoem-08-2019-0602

DOI: 10.1108/IJOEM-08-2019-0602

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