Corruption Control as a Catalyst for Financial Development: A Global Comparative Study

Recep Ali Küçükçolak (), Gözde Bozkurt, Necla İlter Küçükçolak, Adnan Veysel Ertemel and Sami Küçükoğlu
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Recep Ali Küçükçolak: Faculty of Business Administration, Istanbul Ticaret University, Istanbul 34445, Türkiye
Gözde Bozkurt: Faculty of Economics and Administrative Sciences, Istanbul Beykent University, Istanbul 34396, Türkiye
Necla İlter Küçükçolak: Market Operations, Turkish Mercantile Exchange, Ankara 06530, Türkiye
Adnan Veysel Ertemel: Faculty of Business Administration, Istanbul Teknik University, Istanbul 34467, Türkiye
Sami Küçükoğlu: Institute of Finance, Istanbul Ticaret University, Istanbul 34445, Türkiye

JRFM, 2025, vol. 18, issue 2, 1-27

Abstract: This study investigates the impact of anti-corruption efforts on financial development across different economies, using G7 and E7 countries as comparative groups. Recognizing corruption as a barrier to economic growth, the research examines how effective corruption control can enhance the efficiency of the financial sector, foreign direct investment (FDI), and capital market development. The methodology includes panel cointegration tests—namely Pedroni, Kao, and Westerlund tests—alongside fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) estimations to assess the long-term relationships between corruption control and financial development. The findings reveal a statistically significant cointegration relationship, suggesting that anti-corruption measures positively influence financial development in both G7 and E7 countries, albeit more strongly in E7 economies. Specifically, the Westerlund test results, which take cross-sectional dependencies into account, reinforce the robustness of the findings. The study underscores the importance of tailoring anti-corruption policies to each country’s unique economic framework, highlighting that while G7 countries benefit from advanced institutional structures, E7 countries experience more pronounced effects of corruption control on financial development and FDI. These insights contribute to the policy discourse on sustainable economic development by emphasizing the role of governance quality in fostering robust financial systems and attracting international investment.

Keywords: corruption control; financial development; market regulations; economic growth; panel cointegration (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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