Outward FDI from the USA and host country financial transparency

Atems, Bebonchu; Mullen, John K.

doi:10.1080/09638199.2016.1191526

Cited by 4 publications

(3 citation statements)

References 51 publications

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“…The role of FDI in facilitating tax evasion and capital flight has been widely documented in economic literature (Perez et al , 2012; Jones and Temouri, 2016; Edoun et al , 2016; Atems and Mullen, 2016; Merz et al , 2017; Owens et al , 2018; Damgaard et al , 2019; Siranova et al , 2021). Perez et al (2012) examine the role of FDI in facilitating money laundering and IFFs in transition economies and find that up to 10% of total FDI outflows and 20% of FDI to tax havens are connected with illicit money flows.…”

Section: Literature Reviewmentioning

confidence: 99%

Does blacklisting cause a boomerang effect in combating illicit financial flows? Evidence from developing countries

Yeo,

Ahizi,

Coulibaly

2023

JFC

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Purpose Tax evasion and money laundering have become important sources of illicit financial flows in developing countries. Foreign capital flows used by shell corporates are generally with no real economic activities but motivated by harmful tax practices, thereby inducing loss of revenue for developing countries. Despite the coercive actions, such as backlisting of noncooperative jurisdictions to anti-money laundering and countering terrorism financing standards, illicit financial activities are still eroding the tax base in developing countries. The purpose of the paper is to assess the blacklisting effectiveness as a coercive policy against illicit financial activities. Design/methodology/approach This paper applies a propensity score matching strategy to a sample of 118 developing jurisdictions from 2009 to 2017 to evaluate changes in illicit financial activities following the blacklisting. Findings The results show that rather than altering illicit inflows in blacklisted countries, financial restrictions have produced the inverse, causing a boomerang effect on financial crime activities. The illicit share of capital inflows increases on average by 6 percentage points and 0.7% of GDP following the blacklisting. These results are robust to alternative matching methods and to the hidden bias problem. Originality/value Most of the previous research analyzed the link between blacklisting and fiscal revenues. However, here, the study analyzes whether blacklisting makes countries more cooperative in terms of fighting illicit financial flows.

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Section: Literature Reviewmentioning

confidence: 99%

Does blacklisting cause a boomerang effect in combating illicit financial flows? Evidence from developing countries

Yeo,

Ahizi,

Coulibaly

2023

JFC

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“…As Bebonchu and Mullen (2016) noted, the USA is still the venue of choice for money launderers, cartels and corrupt politicians. The problem is exacerbated by perceived lax regulation (e.g.…”

Section: Literature Reviewmentioning

confidence: 99%

Developing a laundered funds destination theory: applying the Walker–Unger gravity model to US-based money launderer country preference from 2000 to 2020

Román

Schaefer

2022

JMLC

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Purpose Although economists and academics have studied money laundering for several decades, there continues to be gaps in the research due to a lack of reliable data on money laundering activity, and a lack of detailed sources and methods of collection in government-based reporting. The purpose of this study is to apply the Walker-Unger gravity model and examine US-based money launderer preference for the 2000-2020 time frame. This paper then compares those results with previous applications of the model and identifies trends, which may serve as the foundations of a money launderer preference theory. The results of the investigation ranked countries by preference of US-based money launderers and determined that there was consistency in country destination preference even during recessionary periods. Design/methodology/approach The Walker–Unger gravity model as applied by Roman et al. (2021) is used to conduct the investigation, to maintain consistency in the application of the Walker–Unger model and further the objective of validating the attractiveness simulation. The model tests the predictive capability of the independent variables to establish the degree of attractiveness each country represents for the funds of US-based money launderers. A score is generated by the model, which is then used to analyze and interpret its significance in relation to all sampled countries. Findings Model results reveal the countries with the highest attractiveness for US-based money launderers during 2000–2020 were Australia, the Bahamas, Bermuda, Canada, Cayman Islands, Norway, Monaco, Puerto Rico, Switzerland and the USA. Model results show that over the two decades the proportion of money flow scores changed but not to a degree that would alter the country preference of US-based money launderers. US-based money launderers tended to use the same countries for their illicit financial activities, regardless of the state of the legitimate economy. Research limitations/implications One of the limitations of the model is that it does not show the effect of money laundering on legitimate economic activity. Practical implications The model results will give insight into the preferred destination of US-based money launderers and therefore frame one component of money laundering activities in the USA for the examined time period. Social implications A secondary objective of this study is to evaluate if any changes to US-based money launderer preferences occurred during the three most recent periods of economic downturn in the USA. Originality/value The model results will give insight into the preferred destination of US-based money launderers and therefore frame one component of money laundering activities in the USA for the examined time period. A secondary objective of this study is to evaluate if any changes to US-based money launderer preferences occurred during the three most recent periods of economic downturn in the USA. The periods chosen are the 2001 9/11 terrorist attacks, the 2007/08 global financial crisis and the COVID-19 pandemic.

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“…Busse and Hefeker () also find that institutional quality matters for FDI though they find a weaker relationship between corruption and FDI flows than with other political factors such as government stability, conflicts, law and order, ethnic tensions and bureaucratic quality. Atems and Mullen () study US outward FDI and find that corruption in the host country discourages investment although they also find that money laundering possibilities attract investment.…”

Section: Introductionmentioning

confidence: 99%

Experts’ Perceptions Versus Firms’ Experiences of Corruption and Foreign Direct Investment

Gillanders

Parviainen

2017

The Manchester School

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This paper documents that standard measures of corruption based on the perceptions of experts and opinion surveys and measures based on the experiences of firms can in some cases lead to quite different conclusions as to how much of a problem corruption is in a country. We then show that while perceptions of corruption are significantly associated with the amount of foreign direct investment that a country attracts, the experience on the ground is not. This finding is robust to alternative perceptions and experience measures and the inclusion of standard empirical foreign direct investment model controls. When we look at establishment modes of foreign investors we find some evidence that direct investment that builds new operations from zero in a foreign country (greenfield investment) is significantly associated with the experience of corruption while mergers and acquisitions is driven by perceptions. JEL Classification: F21, F23, D73

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Outward FDI from the USA and host country financial transparency

Cited by 4 publications

References 51 publications

Does blacklisting cause a boomerang effect in combating illicit financial flows? Evidence from developing countries

Does blacklisting cause a boomerang effect in combating illicit financial flows? Evidence from developing countries

Developing a laundered funds destination theory: applying the Walker–Unger gravity model to US-based money launderer country preference from 2000 to 2020

Experts’ Perceptions Versus Firms’ Experiences of Corruption and Foreign Direct Investment

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