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Does corruption matter for stock markets? The role of heterogeneous institutions

In examining the role of institutions in resisting corruption and its impact on growth, most studies concentrate on the aggregate level and conclude that sound institutions enhance growth. We focus instead on varying dimensions of heterogeneous institutions in the presence of corruption and their in...

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Detalles Bibliográficos
Autores principales: Lakshmi, Geeta, Saha, Shrabani, Bhattarai, Keshab
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Elsevier B.V. 2021
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7580595/
https://www.ncbi.nlm.nih.gov/pubmed/33110283
http://dx.doi.org/10.1016/j.econmod.2020.10.011
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author Lakshmi, Geeta
Saha, Shrabani
Bhattarai, Keshab
author_facet Lakshmi, Geeta
Saha, Shrabani
Bhattarai, Keshab
author_sort Lakshmi, Geeta
collection PubMed
description In examining the role of institutions in resisting corruption and its impact on growth, most studies concentrate on the aggregate level and conclude that sound institutions enhance growth. We focus instead on varying dimensions of heterogeneous institutions in the presence of corruption and their interactive effect on stock returns in four emerging economies: Brazil, Russia, India, and China (BRIC). We pay particular attention to democratic accountability, bureaucratic quality, and law and order. Using monthly data for the first time in this literature, we find that corruption and other weaker institutions lower stock returns during the period 1995–2014. However, interaction effects show interesting mixed results: Bureaucratic quality can mitigate the ill effects of corruption and increase returns by reducing red tape, whereas corruption distorts law and order and lowers stock returns. Our findings suggest that policies to enhance bureaucratic efficiency can abate the adverse effects of corruption, but a restrictive law and order environment tends to lower stock returns.
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spelling pubmed-75805952020-10-23 Does corruption matter for stock markets? The role of heterogeneous institutions Lakshmi, Geeta Saha, Shrabani Bhattarai, Keshab Econ Model Article In examining the role of institutions in resisting corruption and its impact on growth, most studies concentrate on the aggregate level and conclude that sound institutions enhance growth. We focus instead on varying dimensions of heterogeneous institutions in the presence of corruption and their interactive effect on stock returns in four emerging economies: Brazil, Russia, India, and China (BRIC). We pay particular attention to democratic accountability, bureaucratic quality, and law and order. Using monthly data for the first time in this literature, we find that corruption and other weaker institutions lower stock returns during the period 1995–2014. However, interaction effects show interesting mixed results: Bureaucratic quality can mitigate the ill effects of corruption and increase returns by reducing red tape, whereas corruption distorts law and order and lowers stock returns. Our findings suggest that policies to enhance bureaucratic efficiency can abate the adverse effects of corruption, but a restrictive law and order environment tends to lower stock returns. Elsevier B.V. 2021-01 2020-10-22 /pmc/articles/PMC7580595/ /pubmed/33110283 http://dx.doi.org/10.1016/j.econmod.2020.10.011 Text en © 2020 Elsevier B.V. All rights reserved. Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre - including this research content - immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active.
spellingShingle Article
Lakshmi, Geeta
Saha, Shrabani
Bhattarai, Keshab
Does corruption matter for stock markets? The role of heterogeneous institutions
title Does corruption matter for stock markets? The role of heterogeneous institutions
title_full Does corruption matter for stock markets? The role of heterogeneous institutions
title_fullStr Does corruption matter for stock markets? The role of heterogeneous institutions
title_full_unstemmed Does corruption matter for stock markets? The role of heterogeneous institutions
title_short Does corruption matter for stock markets? The role of heterogeneous institutions
title_sort does corruption matter for stock markets? the role of heterogeneous institutions
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7580595/
https://www.ncbi.nlm.nih.gov/pubmed/33110283
http://dx.doi.org/10.1016/j.econmod.2020.10.011
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