Does financial development reduce the level of corruption? Evidence from a global sample of 140 countries

Abstract

The current research explores the role of financial sector development on the control of corruption in a global sample of 140 countries. Using annual data from 1996 to 2015, this study makes use of system generalized method of moments technique to identify the determinants of corruption across the full sample, low and lower middle-income countries and, upper middle and high-income countries.Our empirical findings show that financial development plays an important role in controlling the growth of corruption across the full sample, low and lower middle-income countries and upper middle and high-income countries. Similarly, per capita income has a significant positive impact on control of corruption in upper middle and high-income countries, while education plays a similar role in low and lower middle-income countries. On the contrary, the per capita income, trade openness, government expenditure, political rights and civil liberty are the major factors, which promote the growth of corruption in low and lower middle-income countries, whereas trade and civil liberty play the same role in high-income countries. Given these findings, our study makes number policy recommendations and adds new knowledge to the empirical literature.

Does corruption hinder the effect of financial development on economic complexity? Evidence from MENA countries

“…This increases competition in the market. It is known that corruption is lower in countries where firms face more competition (Sharma and Paramati 2021). By reducing their level of corruption in this way, we note that these countries will be able to increase the complexity of their export baskets.…”

“…Another segment of the literature, carried by Altunbas and Thornton (2012) as well as Sharma and Paramati (2021), links financial development to corruption. It establishes that financial development plays an important role in combating the growth of corruption.…”

“…Following the work of Aram and Beji (2016), we postulate that corruption in an economy can alter the beneficial effects of financial development on economic complexity. Such an assertion can be justified because an efficient financial sector promotes entrepreneurship and encourages new players in the sector (Sharma and Paramati 2021). This increases competition in the market.…”

Economic Growth, Corruption, and Financial Development: Evidence from Ukraine

“…Corruption, according to popular belief, enhances the chance of positive deals that might not have occurred differently (Saied & Awad-Allah, 2020). The rationale is that when there is corruption, various types of government ineffective actions are addressed by people through unlawful measures such as bribery (Sharma & Paramati, 2020;Song et al, 2021).…”

Effets de la corruption sur l'activité bancaire en Afrique subsaharienne (AfSS)

“…Or, il existe une causalité inverse entre le crédit bancaire et la corruption, source d ' endogénéité. En effet, il est établi que le crédit bancaire accordé au secteur privé réduit la corruption (Altunbaş & Thornton, 2012 ;Sharma & Paramati, 2020). La présomption d ' endogénéité suggère le recours à des techniques économétriques adaptées de sorte à obtenir des estimateurs valides.…”