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Corruption, nonperforming loans, and economic growth: International evidence

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  • Tran Hung Son
  • Nguyen Thanh Liem
  • Nguyen Vinh Khuong

Abstract

This paper explores the impact of corruption on both the banking sector and economic growth; we determine the impact using aggregate data from the World Bank covering 120 countries over the period 2004–2017. The results of 3SLS regressions show that the relationship between corruption and the ratio of nonperforming loans was positive, thus deteriorating the soundness of the banking system. In this study, we also find evidence that banking system is a channel that transfers the impact of corruption on economic growth: Corruption leads to higher levels of nonperforming loans in the banking sector; as a result, it decreases economic growth. The findings survive a battery of robustness tests, including alternative corruption measurement and System Generalized Method of Moments regression for dynamic models with an interaction term.

Suggested Citation

  • Tran Hung Son & Nguyen Thanh Liem & Nguyen Vinh Khuong, 2020. "Corruption, nonperforming loans, and economic growth: International evidence," Cogent Business & Management, Taylor & Francis Journals, vol. 7(1), pages 1735691-173, January.
    • Handle: RePEc:taf:oabmxx:v:7:y:2020:i:1:p:1735691
    DOI: 10.1080/23311975.2020.1735691
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    Cited by:

    1. Hatice Jenkins & Ezuldeen Alshareef & Amer Mohamad, 2023. "The impact of corruption on commercial banks' credit risk: Evidence from a panel quantile regression," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1364-1375, April.
    2. Nesrine Dardouri & Abdelkader Aguir & Ramzi Farhani & Mounir Smida, 2023. "Revisiting the Determinants of Investment- The Case of Tunisia," Post-Print hal-04101430, HAL.
    3. Syed Aamir Aijaz & Grima Simon & Sood Kiran, 2024. "Assessing the Role of the Fintech Era on the Banking Stability of an Emerging Economy: Interaction Analysis of the Indian Banking Industry," Folia Oeconomica Stetinensia, Sciendo, vol. 24(1), pages 182-202.
    4. Chen, Chiou-Wen & Yang, Meizhi, 2024. "The relationship between bureaucratic corruption and financial crisis in an open economy," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1583-1594.

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