The cost of debt and political institutions: the influence of corruption

Chwee-Ming Tee and Teng-Tenk Melissa Teoh

Journal of Financial Crime, 2022, vol. 31, issue 1, 44-62

Abstract: Purpose - This cross-border study’s main purpose is to examine whether there is a significant association between political institutions and the cost of debt. In addition, it also investigates whether this association is moderated by the country’s corruption levels. Design/methodology/approach - This study uses a unique cross-border data set comprising 45,848 firms from 117 countries from 2002 to 2017 to investigate these research questions. Further, the authors use the two-stage least squares method to mitigate issues of endogeneity. Findings - This study finds that political institutions are significantly associated with cost of debt. Specifically, the cost of debt is lower in countries with stronger democratic institutions, smaller government bureaucracies and higher adherence to the rule of law. Further, this association is strengthened by low corruption levels. Originality/value - This study provides new insights into the relationship between political institutions and the cost of debt. Overall, the results reveal that democratic institutions, government bureaucracy and the rule of law are significantly associated with cost of debt. This association is stronger in countries with low levels of corruption and consistent with Transparency’s International notion that accountability and transparency by government political institutions promote sustainable economic growth.

Keywords: Political institutions; Corruption; Cost of debt (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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:jfcpps:jfc-08-2022-0192

DOI: 10.1108/JFC-08-2022-0192

Access Statistics for this article

Journal of Financial Crime is currently edited by Dr Li Hong Xing and Prof Barry Rider

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