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Financial Reforms and Corruption: Which Dimensions Matter?
Author(s) -
Jha Chandan Kumar
Publication year - 2020
Publication title -
international review of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.489
H-Index - 18
eISSN - 1468-2443
pISSN - 1369-412X
DOI - 10.1111/irfi.12210
Subject(s) - language change , corporate governance , financial system , order (exchange) , democracy , financial sector , quality (philosophy) , business , panel data , financial market , economics , good governance , finance , political science , art , philosophy , literature , epistemology , politics , law , econometrics
This paper investigates the effects of reforms in different dimensions of the financial sector on corruption in a panel of 82 countries. It finds that several, but not all, of the policies targeted toward liberalizing financial sector reduce corruption. Specifically, entry barriers, directed credit, securities market development, and the extent of banking supervision are significantly negatively associated with corruption. The effects of reforms in different dimensions of the financial sector also depend on the quality of the governance (bad versus good governance) and whether the country is an advanced or a non‐advanced economy. Finally, a stronger democracy and better law and order are found to be associated with lower corruption.