Does corruption increase emerging market bond spreads?
We study the relationship between corruption and borrowing costs for governments and firms in emerging markets. Combining data on bonds traded in the global market with survey data on corruption compiled by Transparency International, we show that countries that are perceived as more corrupt must pa...
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| Veröffentlicht in: | Journal of economics and business 2003-09, Vol.55 (5), p.503-528 |
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| container_title | Journal of economics and business |
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| creator | Ciocchini, Francisco Durbin, Erik Ng, David T.C |
| description | We study the relationship between corruption and borrowing costs for governments and firms in emerging markets. Combining data on bonds traded in the global market with survey data on corruption compiled by Transparency International, we show that countries that are perceived as more corrupt must pay a higher risk premium when issuing bonds. The global bond market ascribes a significant cost to corruption: an improvement in the corruption score from the level of Lithuania to that of the Czech Republic lowers the bond spread by about one-fifth. This is true even after controlling for macroeconomic effects that are correlated with corruption. We find little evidence that investors became more sensitive to corruption in the wake of the Asian financial crisis. |
| doi_str_mv | 10.1016/S0148-6195(03)00052-3 |
| format | Article |
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Combining data on bonds traded in the global market with survey data on corruption compiled by Transparency International, we show that countries that are perceived as more corrupt must pay a higher risk premium when issuing bonds. The global bond market ascribes a significant cost to corruption: an improvement in the corruption score from the level of Lithuania to that of the Czech Republic lowers the bond spread by about one-fifth. This is true even after controlling for macroeconomic effects that are correlated with corruption. 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| fulltext | fulltext |
| identifier | ISSN: 0148-6195 |
| ispartof | Journal of economics and business, 2003-09, Vol.55 (5), p.503-528 |
| issn | 0148-6195 1879-1735 |
| language | eng |
| recordid | cdi_proquest_journals_209792549 |
| source | RePEc; Elsevier ScienceDirect Journals |
| subjects | Bond issues Borrowing Corruption Country risk Economic models Economic theory Emerging market Emerging markets Interest costs Studies |
| title | Does corruption increase emerging market bond spreads? |
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