Corruption and its diverse effect on credit risk: global evidence

Rashedul Hasan; Muhammad Ashfaq

doi:10.1186/s43093-021-00060-1

Corruption and its diverse effect on credit risk: global evidence

Rashedul Hasan, Muhammad Ashfaq

School of Economics, Finance and Accounting

Research output: Contribution to journal › Article › peer-review

13 Downloads (Pure)

Abstract

Corruption has a complex relationship with economic growth. We have explored the impact of corruption on credit risk from a global perspective. The sample consists of 178 countries and covers 18 years that range from 2000 to 2017. Non-performing loan (NPL) is used as a proxy for credit risk and data regarding NPL is collected from the World Bank Database. Corruption scores are collected from the Transparency International reports. Panel regression results provide a positive association between corruption and credit risk for the global sample. Generalized Methods of Moments (GMM) regression and robustness tests validate the findings. However, sub-sample analysis provides support for “grease the wheel” hypothesis for high corruption countries and indicate that corruption is beneficial in a weak form of governance and excessive regulatory pressure. This study advocate for the importance of strong governance mechanisms in high corruption countries that can minimize the impact of corruption on banking sector profitability and ensure economic development. Unlike past literature, we provide global evidence on the association between corruption and credit risk for the banking sector which allows generalizability.

Original language	English
Article number	18
Number of pages	13
Journal	Future Business Journal
Volume	7
Early online date	21 Apr 2021
DOIs	https://doi.org/10.1186/s43093-021-00060-1
Publication status	Published - 21 Apr 2021

Bibliographical note

Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.

Keywords

Corruption
Credit risk
banks
Bureaucracy
governance
corporate finance

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

Access to Document

10.1186/s43093-021-00060-1

PublishedFinal published version, 972 KBLicence: CC BY

Cite this

@article{85291abfd7f54456bed68580f16b87c7,

title = "Corruption and its diverse effect on credit risk: global evidence",

abstract = "Corruption has a complex relationship with economic growth. We have explored the impact of corruption on credit risk from a global perspective. The sample consists of 178 countries and covers 18 years that range from 2000 to 2017. Non-performing loan (NPL) is used as a proxy for credit risk and data regarding NPL is collected from the World Bank Database. Corruption scores are collected from the Transparency International reports. Panel regression results provide a positive association between corruption and credit risk for the global sample. Generalized Methods of Moments (GMM) regression and robustness tests validate the findings. However, sub-sample analysis provides support for “grease the wheel” hypothesis for high corruption countries and indicate that corruption is beneficial in a weak form of governance and excessive regulatory pressure. This study advocate for the importance of strong governance mechanisms in high corruption countries that can minimize the impact of corruption on banking sector profitability and ensure economic development. Unlike past literature, we provide global evidence on the association between corruption and credit risk for the banking sector which allows generalizability.",

keywords = "Corruption, Credit risk, banks, Bureaucracy, governance, corporate finance",

author = "Rashedul Hasan and Muhammad Ashfaq",

note = "Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.",

year = "2021",

month = apr,

day = "21",

doi = "10.1186/s43093-021-00060-1",

language = "English",

volume = "7",

journal = "Future Business Journal",

issn = "2314-7202",

publisher = "Springer Open",

}

TY - JOUR

T1 - Corruption and its diverse effect on credit risk: global evidence

AU - Hasan, Rashedul

AU - Ashfaq, Muhammad

N1 - Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.

PY - 2021/4/21

Y1 - 2021/4/21

N2 - Corruption has a complex relationship with economic growth. We have explored the impact of corruption on credit risk from a global perspective. The sample consists of 178 countries and covers 18 years that range from 2000 to 2017. Non-performing loan (NPL) is used as a proxy for credit risk and data regarding NPL is collected from the World Bank Database. Corruption scores are collected from the Transparency International reports. Panel regression results provide a positive association between corruption and credit risk for the global sample. Generalized Methods of Moments (GMM) regression and robustness tests validate the findings. However, sub-sample analysis provides support for “grease the wheel” hypothesis for high corruption countries and indicate that corruption is beneficial in a weak form of governance and excessive regulatory pressure. This study advocate for the importance of strong governance mechanisms in high corruption countries that can minimize the impact of corruption on banking sector profitability and ensure economic development. Unlike past literature, we provide global evidence on the association between corruption and credit risk for the banking sector which allows generalizability.

AB - Corruption has a complex relationship with economic growth. We have explored the impact of corruption on credit risk from a global perspective. The sample consists of 178 countries and covers 18 years that range from 2000 to 2017. Non-performing loan (NPL) is used as a proxy for credit risk and data regarding NPL is collected from the World Bank Database. Corruption scores are collected from the Transparency International reports. Panel regression results provide a positive association between corruption and credit risk for the global sample. Generalized Methods of Moments (GMM) regression and robustness tests validate the findings. However, sub-sample analysis provides support for “grease the wheel” hypothesis for high corruption countries and indicate that corruption is beneficial in a weak form of governance and excessive regulatory pressure. This study advocate for the importance of strong governance mechanisms in high corruption countries that can minimize the impact of corruption on banking sector profitability and ensure economic development. Unlike past literature, we provide global evidence on the association between corruption and credit risk for the banking sector which allows generalizability.

KW - Corruption

KW - Credit risk

KW - banks

KW - Bureaucracy

KW - governance

KW - corporate finance

UR - https://doi.org/10.1186/s43093-021-00060-1

U2 - 10.1186/s43093-021-00060-1

DO - 10.1186/s43093-021-00060-1

M3 - Article

VL - 7

JO - Future Business Journal

JF - Future Business Journal

SN - 2314-7202

M1 - 18

ER -

Corruption and its diverse effect on credit risk: global evidence

Abstract

Bibliographical note

Keywords

UN SDGs

Access to Document

Other files and links

Fingerprint

Cite this