Experience-Based Corporate Corruption and Stock Market Volatility: Evidence from Emerging Markets

Chi Keung Marco Lau, Ender Demir, Mehmet Huseyin Bilgin

Research output: Contribution to journalArticle

18 Citations (Scopus)

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).
LanguageEnglish
Pages1-13
Number of pages13
JournalEmerging Markets Review
Volume17
Early online date6 Aug 2013
DOIs
Publication statusPublished - Dec 2013
Externally publishedYes

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Government policy
Emerging markets
Uncertainty
Corruption
World Bank
Stock market volatility
Bribes
Macroeconomics
Stock price volatility
Business environment
General equilibrium model

Cite this

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Experience-Based Corporate Corruption and Stock Market Volatility : Evidence from Emerging Markets. / Lau, Chi Keung Marco; Demir, Ender; Bilgin, Mehmet Huseyin.

In: Emerging Markets Review, Vol. 17, 12.2013, p. 1-13.

Research output: Contribution to journalArticle

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