Does corruption play a role in the process of financial globalization in emerging countries?
| Date | 05 August 2024 |
| Pages | 468-482 |
| DOI | https://doi.org/10.1108/JFC-04-2024-0130 |
| Published date | 05 August 2024 |
| Author | Zuhairan Yunmi Yunan,W. Alejandro Pacheco-Jaramillo |
Does corruption play a role in the
process of financial globalization
in emerging countries?
Zuhairan Yunmi Yunan
Department of Economics, State Islamic University Syarif Hidayatullah Jakarta,
Tangerang Selatan, Indonesia, and
W. Alejandro Pacheco-Jaramillo
Department of Economics, University Anahuac Mexico –Northern Campus,
Mexico City, Mexico
Abstract
Purpose –This paper aims to examinevarious indicators related to corruption and determinetheir impact
on financial globalization in emerging countries. It will consider other factors that may impact financial
globalization and focuson how corruption within political, executive and public sectorinstitutions can affect
this process.
Design/methodology/approach –This paper uses a generalizedmethod of moments (GMM) for a data
sample of emergingcountries covering 2000–2020. Corruption measurementsare derived from the varieties of
democracy data sets and Transparency International. It also includes data on foreign direct investment,
portfolio flows, foreign exchange and international debt as separate indicators of financial globalization.
These measures provide more detailed information on the types of financial transactions occurring across
countries.
Findings –The results reveal that foreign investors may be less likely to enter certain sectors of the
economy due to concerns about unethical practices and difficulties navigating the regulatory landscape in
countries with high levelsof corruption. This can lead to underdevelopment in sectorsthat are attractive to
foreigninvestment and a reliance on a narrow range of sectors.
Originality/value –This paper offers valuable insights by integrating corruption and financial
globalization indicators,using the GMM for robust analysis. It highlights how corruption influences foreign
investment decisions, potentially leading to sectoral underdevelopment and overreliance in emerging
countries.
Keywords Corruption, FDI, Financial globalization, Portfolio flows, Emerging countries
Paper type Research paper
1. Introduction
Corruption is a complex conceptthat can be understood from various viewpoints, including
religion, law, sociology, politics and economics. Mo (2001) emphasizes the importance of
defining corruption in this way for the purposes of measurement. Corruption is generally
defined as the misuse of power or authority for personal gain. The United Nations
Convention against Corruptiondoes not provide a specificdefinition, but other institutions,
such as the World Bank and Transparency International, define it as the abuse of public
power for private benefit. The Organisation for Economic Co-Operation and Development
JEL classification –D73, F6, G11, O16
JFC
32,2
468
Journalof Financial Crime
Vol.32 No. 2, 2025
pp. 468-482
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-04-2024-0130
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1359-0790.htm
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