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

Chi Keung Marco Lau; Ender Demir; Mehmet Huseyin Bilgin

doi:10.1016/j.ememar.2013.07.002

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 journal › Article › peer-review

46 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).

Original language	English
Pages (from-to)	1-13
Number of pages	13
Journal	Emerging Markets Review
Volume	17
Early online date	6 Aug 2013
DOIs	https://doi.org/10.1016/j.ememar.2013.07.002
Publication status	Published - Dec 2013
Externally published	Yes

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title = "Experience-Based Corporate Corruption and Stock Market Volatility: Evidence from Emerging Markets",

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).",

keywords = "Stock market volatility, Corruption, Emerging markets, Uncertainty",

author = "Lau, {Chi Keung Marco} and Ender Demir and Bilgin, {Mehmet Huseyin}",

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language = "English",

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AU - Demir, Ender

AU - Bilgin, Mehmet Huseyin

PY - 2013/12

Y1 - 2013/12

N2 - 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).

AB - 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).

KW - Stock market volatility

KW - Corruption

KW - Emerging markets

KW - Uncertainty

UR - https://www.journals.elsevier.com/emerging-markets-review

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DO - 10.1016/j.ememar.2013.07.002

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SP - 1

EP - 13

JO - Emerging Markets Review

JF - Emerging Markets Review

SN - 1566-0141

ER -

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

Abstract

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