فساد شرکت ها و نوسانات بازار سهام مبتنی بر تجربه: شواهد حاصل از بازارهای نوظهور

This paper reassesses how “experience-based” corporate corruption affects stock market volatility in 14 emerging markets. We match the World Bank enterprise-level data on bribes with a unique cross-country macroeconomics dataset obtained from the World Bank development indicators. It is found that wider coverage of “realized” corporate corruption in the emerging markets investigated reduces the stock market volatility, attributed to decrease in uncertainty about government policy with regard to the business environment, as implied by the general equilibrium model of Pastor and Veronesi (2012). Overall, our results suggest that stock price volatility decreases as the uncertainty about government policy becomes more predictable, which is consistent with the testable hypotheses of Pastor and Veronesi (2012).

Stock market facilitates and therefore promotes capital formation, and therefore promotes economic growth through encouraging saving and real investment. For financial markets with risk-adverse investors, less saving and investment will be realized if the underlining stock market is too volatile, and this is the usual implication of general equilibrium model with a representative agent maximizing utility under uncertainty (Du and Wei, 2004). As a stylized fact, the volatility of stock market price index across different countries can vary enormously. The volatility of stock returns is higher in emerging markets; for example the volatility of stock market in Taiwan in 2006 is 1.19, as measured by the standard deviation of the daily stock price returns, which is higher than that of Hong Kong of 0.92. This figure also varies within emerging economies: Brazil and Chile are the emerging markets with modest market liquidity (over 23% in 2012), while the volatility of Brazil is 0.6% higher than that of Chile in 2012. Moreover, the volatility also varies substantially across time periods. The stock market volatility for Chile in 2012 is 100% less than that of the year in 2008, when financial crisis was prevailing. One important source of stock market volatility comes from “government policy uncertainty”, as argued by Pastor and Veronesi (2012). The main purpose of this paper is to assess the role of “corporate bribery” to public officials, as a way of reducing government policy uncertainty in explaining the difference in market volatility across countries, along with other detrimental factors like the volatility of fundamentals and the maturity of the stock markets. To the best of our knowledge, this has not been studied on a systematic way. A similar vein of research is the examination of the effects of corruption on financial market volatility by Zhang (2012). The author finds evidence of correlations of corruption with financial market stability. However, the measure of corruption was obtained from the Corruption Perception Index 2007 and the Index of Economic Freedom 2007 leading to an unreliable conclusion of this study. It is well known that corruption perception index cannot be used to compare the degree of corruption across countries, attributed to the response scale bias for corruption perception index. Leon et al. (2012) argue that corruption perception index is problematic as a variable to measure of the corruption levels across countries and it will subsequently lead to a misleading conclusion regarding the relationship between corruption and financial market stability. According to Fan et al. (2009), the previous literatures widely use perception-based corruption indexes that complied from aggregated perceptions of businessmen or country experts. It is problematic in the sense that the rankings of corruption index are perhaps, based on common press depictions of countries or conventional notions about what institutions or cultures are conducive to corruption. As explained by the authors, there is a great variation when we compared the subjective corruption indexes of Transparency International, the World Bank, and the International Country Risk Guide to the level of reported experience with corruption.1 Recognizing the pitfall of using these perception-based corruption indexes, the authors use an alternative measure of corruption in their study, which is experience-based.2 The experience-based corruption measure has been used in several studies, including a study on the telecom sector: Berg et al. (2012) use the same experience-based corporate bribery measurement and they find that stricter regulatory policy on the telecom sector increases firm's accountability and therefore reduces illegal bribery. Another study seeks to explain corporate corruption using political decentralization as an influential factor. Fan et al. (2009) find evidence that in countries with a larger number of administrative tiers, the reported bribery was more frequent in that business environments. While the previous studies examine the impact of political events, which only impose risk indirectly on the market and have potential to affect market volatility, our paper differs in several critical ways. Unlike the radical events such as political unrest or presidential election, which occurs on every 3–5 years, used to quantify political uncertainty; we use corruption perception to measure uncertainty. There are several advantages to model the effect of policy uncertainty on stock market volatility by using corporate corruption instead of political unrests like civil war in Syria. First, small sample bias is a concern because usually financial markets are absent in countries where political unrest occurs. Second, presidential election may have an effect on stock market election in a developed market; however, monetary policies and fiscal policies sometimes may be changed by the prevailing government to boost employment and stock market before election. More importantly, unlike civil war or presidential elections, we need to search for a variable that the uncertainty of stakeholders in the stock market can be better modeled. For the above purpose corporate corruption is a natural candidate to be that variable to proxy the uncertainty of firms evolving in the business environment. Compared to other measures, corporate corruption has a continuous and substantial impact on the operations of firms. Although it is widely documented that government corruption may negatively affect the performance of firms (Getz and Volkema, 2001), Galang (2012) argues that the impact of corruption on an individual firm's performance is heterogeneous and determined by the characteristics, capabilities, and motivations of firms. Zhou and Peng (2012) discuss that bribery may either grease the wheel of commerce or sand the wheel of growth. This impact (either positive or negative) of bribery will depend on the size of the firms. By using a data of 2686 firms from 48 countries, it is found that bribery (measured by the percentage of sales used as bribery payments to government officials) has a significant negative effect on firm growth for small and medium-sized firms. For large firms, there is no evidence of a negative effect of bribery on firm growth. When compared to the unlisted firms, the listed firms in emerging markets are considered less likely to be hit by the corruption due to their connections with government officials, size, and larger financial sources. Moreover, they can benefit from those relations and financial sources which may lead to decrease in uncertainty about government policy regarding to the business environment. The data we used is not based on the press depiction of corruption or political unrest, instead we use survey responses of businessmen (Enterprise Survey of World Bank) in particular countries about their own concrete experiences with corrupt officials and their own perception about political instability concerning the business environment. To the best of our knowledge, this paper is the first study on the impact of corruption except Zhang (2012) in which the variable of corruption is problematic and the model lacks important control variables. We investigate the role of corruption in explaining cross-country differences in 14 emerging stock market volatility3 with a time period span from 2006 to 2012. We use a new measure of corruption in the business environment for 14 emerging economies that is collected by the World Bank; as a common form of expropriation risk from the government that has direct impact on a firm's interest, and therefore on stock market volatility. The empirical evidence shows that countries with higher corrupted business environment do have less volatile stock markets, even after controlling liquidity and maturity of the markets, firm characteristics, and macroeconomic policy variables. The rest of the paper is organized as follows: Section 2 provides a literature review. Section 3 briefly describes the data. Section 4 presents the methodology while Section 5 discusses the findings. Section 6 provides a summary and concludes the paper.

This paper investigates the impact of corruption on stock market volatility in 14 emerging markets with a time period span of 2006 to 2012 along with other detrimental factors like the volatility of fundamentals and the maturity of the stock markets. In this study we extend the model of Zhang (2012) by adding additional control variables. The variable that we use for the corporate corruption measure is from Enterprise Survey of World Bank, which is the “percentage of informal payments to public officials”. Unlike other measures such as political events or elections, corporate corruption has continuous and substantial impact on the operations of firms. Corporate corruption is a natural candidate to be that variable to proxy the uncertainty of firms evolving in the business environment. Zhou and Peng (2012) discuss that bribery may either grease the wheel of commerce or sand the wheel of growth. The literature provides evidence in favor of both views. Nevertheless, our analysis was limited by the sample size of 14 countries; we can include more countries in the future when the World Bank updated their database, to enable researchers to use a longer panel dataset. Another extension could be adding more cultural and business ethical variables or non-state welfare supports such as families and religions, as suggested by Cheung et al. (2012), to moderate the effects of firms' bribery. Future researchers may also have to incorporate shareholders–manager relationship as a moderator for bribery into the model. By using the World Bank Enterprise Surveys of 2002–2005, Ramdani and Witteloostuijn (2012) show that firm bribery is more likely to happen if the principal-owner of the firm is male. Another fruitful extension could be the linkage between market volatility and firm's hedging decision (Lau and Bilgin, 2013). Our analysis provides insight into the literature of stock market volatility and asymmetric information of agents. We find that countries with higher corrupted business environment do have less volatile stock markets, even after controlling liquidity and maturity of the markets, firm characteristics, and economic variables. The investors consider bribery as a factor reducing the uncertainty that firms are facing. Therefore, when there is wider converge of corporate corruption, the stock market volatility decreases. The reason is that now it becomes easier to predict the outcome of the government policy change, and hence eliminate the uncertainty that it imposes on a firm's performance.