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Corruption and International Valuation: Does Virtue Pay?

Charles Lee and David Ng ()

MPRA Paper from University Library of Munich, Germany

Abstract: Using firm-level data from 44 countries, we investigate the relation between corruption and international corporate values. Our analysis shows that firms from more corrupt countries trade at significantly lower market multiples. The effect is both economically and statistically significant. Furthermore, using a two-stage estimation procedure, we show that corruption impacts firm value primarily through lower expected future cash flows, most directly captured by firms’ profitability forecasts. Collectively, our evidence shows corruption has significant economic consequences for shareholder value.

Keywords: corruption; international valuation; market multiple (search for similar items in EconPapers)
JEL-codes: G00 G3 (search for similar items in EconPapers)
Date: 2002-11, Revised 2006-10
New Economics Papers: this item is included in nep-reg
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Citations: View citations in EconPapers (12)

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Working Paper: Corruption and International Valuation: Does Virtue Pay? (2002) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:590

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