Foreign equity portfolio flow and corruption: A cross-country evidence

Frank Kwabi, Agyenim Boateng, Samuel Fosu, Ting Ting Zhu, Marian Chijoke-Mgbame

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)

Abstract

This study examines the impact of foreign equity portfolio investment on corruption. Employing a large dataset of 44 countries from 2001 to 2015 and three different measures of corruption, our results show that foreign investors from well-governed countries tend to foster public accountability, reduce asymmetry information and corruption. We find empirical evidence that foreign equity portfolio investment interacts with stock market development and central bank transparency to reduce corruption. Our results suggest that stock market development and central bank transparency are regarded as complementary by international portfolio investors. Further analysis indicates that corruption appears more prevalent in countries where domestic investors dominate the stock market. Our results are robust to endogeneity using dynamic generalized methods of moments (GMM). The findings suggest that attracting foreign equity investors reduces corruption, implying significant benefits for portfolio diversification.

Original languageEnglish
Pages (from-to)68-87
Number of pages20
JournalInternational Journal of Finance and Economics
Volume27
Issue number1
DOIs
Publication statusPublished - Jan 2022

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Fingerprint

Dive into the research topics of 'Foreign equity portfolio flow and corruption: A cross-country evidence'. Together they form a unique fingerprint.

Cite this