Effect of quality of governance on the relationship between illicit financial flows and economic growth
| DOI | https://doi.org/10.1108/JFC-10-2021-0226 |
| Published date | 22 November 2021 |
| Date | 22 November 2021 |
| Pages | 1382-1395 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial crime |
| Author | Hazlina Mohd Padil,Eley Suzana Kasim,Fazlida Mohd Razali,Ruhaya Atan,Haziq Aminullah |
Effect of quality of governance on
the relationship between illicit
financial flows and economic growth
Hazlina Mohd Padil
Faculty of Law, Universiti Teknologi MARA, Cawangan Negeri Sembilan,
Kampus Seremban, Seremban, Malaysia
Eley Suzana Kasim
Accounting Research Institute, Universiti Teknologi MARA, Shah Alam, Malaysia
Fazlida Mohd Razali and Ruhaya Atan
Accounting Research Institute, Universiti Teknologi MARA,
Shah Alam, Malaysia, and
Haziq Aminullah
The School of Social Sciences, The University of Manchester, Manchester, UK
Abstract
Purpose –The purpose of this paper is twofold.First, the study aims to examine the direct effect of illicit
financial flows (IFF) and quality of governance (QoG) on economic growth. Second, this study seeks to
examine themoderating effect of QoG on the economic consequencesof IFF.
Design/methodology/approach –This study collected data from nine The Association of Southeast
Asian Nations (ASEAN) countries for theperiod of 10 years from 2008 to 2019. The study concerned an analysis
of the testing of a conceptual framework which based on secondary data which may lack a comprehensive
substantiation on the grounds of measurement theory. A partial least squares (PLS) modelling using the
SmartPLS 3.2.8 version was used as a statistical tool to examine the measurement and structural model.
Findings –Key findings provideempirical support on the effect of IFF and QoG on economic growth.It also
confirmed that QoG significantlymoderated the relationship between IFF and economicgrowth by reducing
the negativeimpact of IFF on economic growth.
Practical implications –Immediate corrective action needs to be implemented by policymakers of
ASEAN countriesto strengthen QoG to effectively curb IFF activities.
Originality/value –This study provides current empiricalevidence on the relationship of IFF, QoG and
economicgrowth within ASEAN countries.
Keywords Economic growth, Illicit financial flows, Quality of governance, Moderator, PLS-SEM
Paper type Research paper
1. Introduction
Illicit financial flows (IFF) experienced by countries reflects the level of financial integrity.
The higher the IFF, the lower is the financial integrity (GFI,2019). Global Financial Integrity
The authors would like to acknowledge the support given by Accounting Research Institute of
Universiti Teknologi MARA, Malaysia through a research grant award (Project code: 600-RMC/ARI
5/3(015/2020). The authors’gratitude is also extended to all parties who are directly or indirectly
involved in completing the research project.
JFC
29,4
1382
Journalof Financial Crime
Vol.29 No. 4, 2022
pp. 1382-1395
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-10-2021-0226
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