Corruption and external debt nexus in sub-Saharan Africa: a panel quantile regression approach
| Date | 09 October 2023 |
| Pages | 505-519 |
| DOI | https://doi.org/10.1108/JMLC-07-2023-0125 |
| Published date | 09 October 2023 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | John Kwaku Amoh,Abdallah Abdul-Mumuni,Emmanuel Kofi Penney,Paul Muda,Leticia Ayarna-Gagakuma |
Corruption and external debt
nexus in sub-Saharan Africa:
a panel quantile
regression approach
John Kwaku Amoh
Department of Accounting, Faculty of Accounting and Finance,
University of Professional Studies, Accra, Ghana
Abdallah Abdul-Mumuni
Department of Economics and Actuarial Science,
Faculty of Accounting and Finance, University of Professional Studies,
Accra, Ghana, and
Emmanuel Kofi Penney,Paul Muda and Leticia Ayarna-Gagakuma
Department of Accounting, Faculty of Accounting and Finance,
University of Professional Studies, Accra, Ghana
Abstract
Purpose –Debt sustainabilityand the growing level of external debtin sub-Saharan African (SSA) continue
to be significant research priorities.This study aims to examine the corruption-external debt nexus in SSA
economiesand whether different levels of corruptionbetter explain this relationship.
Design/methodology/approach –The panel quantile regression approachwas applied to account for
the heterogeneous effect of the exogenousvariables on external debts. The research covers 30 yearsof panel
data from 30selected SSA economies for the period spanningfrom 2000 to 2021.
Findings –The empirical findingsof the regression analysis demonstrate the heterogeneous influences of
the exogenousvariables on external debt.While there was a positive impact of foreigndirect investment (FDI)
inflows on external debts,corruption established a negative relationship with externaldebt from the 10th to
the 80th quantile. Thefindings showed a positive link between trade openness and external debt,while they
also showeda negative relationshipbetween gross fixed capital formationand external debt.
Research limitations/implications –It is implied that corruption“sands the wheels”of external debts
in the selected SSA countries. Therefore, the amount of external debt that flows into SSA is inversely
correlatedwith corruption activity.
Originality/value –To the best of the authors’knowledge, this study is one of the first to use panel quantile
regression to analyze how corruption affects debt dynamics across different levels of debt, allowing for a more
nuanced understanding of how corruption affects debt dynamics. Based on the findings of this study, SSA
countries should create enabling environments to attract FDI inflows and to continue to drive domestic revenue
mobilization and capital so as to be less dependent on external debts.
Keywords Corruption, External debt, FDI, Capital formation, Quantile regression
Paper type Research paper
1. Introduction
Literature suggests that foreignborrowing is an important source of finance for investment,
particularly in emerging economies(Tanna et al., 2018). As Todaro and Smith (2011) stated,
Corruption and
external debt
nexus
505
Journalof Money Laundering
Control
Vol.27 No. 3, 2024
pp. 505-519
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-07-2023-0125
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm
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