Do corrupting activities hamper economic growth? Fresh empirical evidence from an emerging economy
| DOI | https://doi.org/10.1108/JFC-11-2019-0150 |
| Published date | 23 January 2020 |
| Date | 23 January 2020 |
| Pages | 1114-1130 |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
| Author | John Kwaku Amoh,Kwasi Awuah-Werekoh,Kenneth Ofori-Boateng |
Do corrupting activities hamper
economic growth? Fresh
empirical evidence from an
emerging economy
John Kwaku Amoh
Department of Accounting, University of Professional Studies,
Accra, Ghana, and
Kwasi Awuah-Werekoh and Kenneth Ofori-Boateng
Department of Accounting and Finance,
Ghana Institute of Management and Public Administration, Accra, Ghana
Abstract
Purpose –This study aims to examine the effect of corruptionon the economic growth of Ghana and to
establishthe strength of relationships among corrupting activities.
Design/methodology/approach –The research used structural equation modelling on selected data
from the World Economic Forum executive opinion survey on corrupting activities and data on economic
growth measuresfrom the world development indicators to achieve the research objectives.
Findings –The results show that all the observedcorrupting activities (except diversion of public funds)
adversely influence selected economic growth indicators. The study concludes that corrupting activities,
independentlyand mutually impede Ghana’s economicgrowth.
Research limitations/implications –The research is limited by the availability of data, hence,
quarteriseddata on selected variables from 2008 to 2017 were examined.
Practical implications –The results suggest that corruption encapsulates all the seven activities of
corruptionto one degree or another, which are economic growth hampering.
Originality/value –The study extends the corruption-economic growth nexus literature by
incorporating several corrupting activities from multiple sectors/areas as follows: the government and
politicians, private businesses, judiciary and citizens into a single model to test how these independently
and mutually impede economic growth. By identifying and using specific corrupting activities from
distinct and diverse sectors/areas to capture both the supply side and demand side of corruption and the
private and public sectors, a better comprehension of the corruption-economic growth nexus is attained.
This may aid emerging economies and anti-corruption agencies in drafting specific and targeted
corruption reduction policies/programmes to minimise poverty and raise living standards to aid the
realisation of sustainable development goals.
Keywords Development, Ghana, Growth, Corruption, Economic growth, Economic
Paper type Research paper
1. Introduction
Regardless of how corruption is defined and perceived, it prevails as one of the most
challenging developmental, political, economic and social issues in recent history. Hence,
debates on the corruption-economic growth nexus continue to attract attention from
policymakers, academicsand researchers.
According to the President of the World Bank, Jim Yong Kim [Global Corruption Book
(GCB), 2017], corruptionis the “number one public enemy”in developing countries and that:
JFC
29,3
1114
Journalof Financial Crime
Vol.29 No. 3, 2022
pp. 1114-1130
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-11-2019-0150
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1359-0790.htm
[...] for every dollar that finds itself in the pocket of a corrupt official or business person, is a
dollar purloined from a pregnant woman who requires healthcare or a girl or boy who desires
education or from poor communities that crave water, roads and schools.
The report further states thatannually about US$1tn is laundered illegally from developing
countries, about US$40bn foreign aid inflows to the poorest nations are lost to corruption
and an estimated 3.6 million people die needlessly as a result of poor healthcare for which
corruption has been blamed.
Further, the Global Financial Integrity (GFI) (2017)[1] estimated that about $1tn is
siphoned out of developing and poor nations annually because of crime, corruption and tax
evasion, which is far in excess of the combined funds that these poor countries get from
foreign direct investment (FDI) and foreign aid (Amoh and Ali-Nakyea, 2019). This
according to Alleyne and Terry (2017)and Amoh and Ali-Nakyea (2019) is the main cause of
the fiscal deficits and rising debts of these poor and emerging countries, which exacerbate
their already weakeconomies.
World Economic Forum (WEF) (2018) estimates the costs of corruption at US$3.6tn
annually and reports that although corruption is prevalent in both rich and poor nations,it
harms poor countries disproportionately. Additionally, with the 2030 sustainable
development goals (SDGs) agenda,the United Nations (UN) reports that corruption is one of
the biggest impediments to the achievement of its targets. A Transparency International
(TI) (2017) survey from 162,136 adult respondents, reports that 25 per cent of them had to
pay bribes to access public servicesin the past year. Teichmann (2019) adds that regardless
of the considerable attempts to combat corruption, it continues to impede international
development.
Organisation for Economic Co-operation and Development, OECD (2018) defines
corruption as “the abuse of a public or private office for personal gain”.Agbodohu and
Churchill (2014) elucidated that corruption is “the use of public office for private gain or in
other words, use of official position, rank or status by an officer for his own personal
benefit”.ToPertiwi (2018) corruption is the result of sound economic agents applying
judicious thinking so as to maximise individual gains. There are several dimensions or
classificationsof corruption (World Economic Forum (WEF), 2018)[2].
These corrupting activities deny some citizens of the goods and services they need to
maximise their economic well-being more especially in sub-Saharan African (SSA)
countries. Freckleton et al. (2012) posit that the negative effects of corruption on these
economies hamper economic growth, bring political instability, disproportionately burden
the poor and undermine the effectiveness of FDI and human capital. Otusanya (2011)
perceives corruption as a hindrance to developmentwhile Fokuoh Ampratwum (2008) adds
that corruption dissipates and misapplies resources from the most socially beneficial
projects, which represses progress in the developing and transition economies. Gillanders
and Parviainen (2018) posit that firms recognise corruption as a hindrance to theirbusiness
operations.
According to Soylu et al. (2018), economic growth is an indicator of the welfare of a
country and is measured by gross national product or its capita value. There are some
indicators that are used to measure this economic well-being of countries, which include
inflation, FDI, interest rate, exports and broad money supply (Yun, 2015;Altaee et al.,
2016).
Most literature in various disciplines has examined the perception of individuals
toward crimes including corruption (Brody and Kiehl, 2010;Rosenmerkel, 2001),
without evaluating its statistical impact on economic growth. In addition, most of the
econometric studies on the corruption-economic growth nexus (Aluchna et al.,2009;
Economic
growth
1115
To continue reading
Request your trial