Effects of corruption on stock exchanges in the 2008 Financial Crisis
DOI:
https://doi.org/10.11606/issn.1982-6486.rco.2019.158490Keywords:
Corruption, 2008 Financial Crisis, Institucional CorruptionAbstract
The purpose of this paper is to determine if the different levels of corruption reflected in the behavior of stock exchanges around the World in the 2008 Financial Crisis. Institutional Choice Theory indicates that, in the period before the Crisis, financial practices that provided large gains and concealed high risk were widespread. We used information from the Transparency International and the World Bank on perceived corruption and the level of governance on a final sample of 56 (fifty-six) countries. For these countries, we identified the main stock exchange and, for each one, the main burse index, whose daily quoted prices we gathered for the period from 2007 to 2009. The main results showed that in countries with greater perceived corruption and lower governance, the 2008 Financial Crisis presented a larger accumulated decrease of the stock exchanges followed by deeper structural breakdown, increased volatility and lower predictability of the drop. We conclude that, in general, the effects of the 2008 Financial Crisis were different according to the level of perceived corruption and governance, being more serious in countries where corruption was more institutionalized.
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