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Corruption and corporate risk-taking: evidence from emerging markets

Author

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  • Quoc Trung Tran

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.

Suggested Citation

  • Quoc Trung Tran, 2020. "Corruption and corporate risk-taking: evidence from emerging markets," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 17(5), pages 1238-1255, December.
    • Handle: RePEc:eme:ijoemp:ijoem-08-2019-0602
    DOI: 10.1108/IJOEM-08-2019-0602
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    Cited by:

    1. Tran, Quoc Trung, 2023. "Employment protection and corporate risk-taking," Finance Research Letters, Elsevier, vol. 51(C).
    2. Trinh, Quoc Dat & Tran, Quoc Trung & Le, Son Dai & Nguyen, Thi Phuong Dung, 2024. "Local corruption and SME investment," Finance Research Letters, Elsevier, vol. 65(C).

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