Experience-based corporate corruption and stock market volatility: evidence from emerging markets

Lau, Chi Keung, Demir, Ender and Bilgin, Mehmet Huseyin (2013) Experience-based corporate corruption and stock market volatility: evidence from emerging markets. Emerging Markets Review, 17. pp. 1-13. ISSN 1566-0141

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Official URL: http://dx.doi.org/10.1016/j.ememar.2013.07.002

Abstract

This paper reassesses how “experience-based” corporate corruption affects stock market volatility in 14 emerging markets. We match the World Bank enterprise-level data on bribes with a unique cross-country macroeconomics dataset obtained from the World Bank development indicators. It is found that wider coverage of “realized” corporate corruption in the emerging markets investigated reduces the stock market volatility, attributed to decrease in uncertainty about government policy with regard to the business environment, as implied by the general equilibrium model of Pastor and Veronesi (2012). Overall, our results suggest that stock price volatility decreases as the uncertainty about government policy becomes more predictable, which is consistent with the testable hypotheses of Pastor and Veronesi (2012).

Item Type: Article
Uncontrolled Keywords: Stock market volatility, corruption, emerging markets, uncertainty
Subjects: L100 Economics
N300 Finance
Department: Faculties > Business and Law > Newcastle Business School > Business and Management
Depositing User: Chi Keung Lau
Date Deposited: 11 Sep 2013 08:45
Last Modified: 04 Dec 2015 13:05
URI: http://nrl.northumbria.ac.uk/id/eprint/13506

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