TY - JOUR
T1 - Corruption, institutions and capital flight
T2 - evidence from Sub-Saharan Africa
AU - Osei-Assibey, Eric
AU - Domfeh, Kingsley Osei
AU - Danquah, Michael
N1 - Publisher Copyright:
© 2018, © Emerald Publishing Limited.
PY - 2018
Y1 - 2018
N2 - Purpose: The purpose of this paper is to investigate the effect of corruption and institutional governance indicators on capital flight in Sub-Saharan Africa. Design/methodology/approach: Using a Portfolio Choice Framework, the study employs two different estimation techniques as Generalized Method of Moment and Fixed Effect Regression on panel data sets of 32 countries in Sub-Saharan Africa over the period 2000-2012. Findings: The variable of interest, corruption, retains its expected positive sign and statistically significant across all the estimations. The relationship remains very strong even when other equally important institutional variables such as regime durability, rule of law and independence of the executive are taken into account. This suggests that a higher perception of corruption among public authorities as in bribery, kickbacks in public procurement, embezzlement of public funds, among others facilitates an increase in capital outflow from SSA. The findings further indicate that regime durability and rule of law are important institutional variables that also significantly influence capital flights in SSA. Practical implications: The findings imply that institutional reforms should be encouraged if SSA is to win the war against corruption and by extension against capital flight. There should be a creation of democratic environment and good governance practices that foster stronger governance institutions, decline in corruption and better domestic investment climate to help reverse the high spate of capital flight in the region. Originality/value: The main value of this paper is using the portfolio choice framework to analyze the relationship between capital flight and corruption in the Sub-Saharan African context.
AB - Purpose: The purpose of this paper is to investigate the effect of corruption and institutional governance indicators on capital flight in Sub-Saharan Africa. Design/methodology/approach: Using a Portfolio Choice Framework, the study employs two different estimation techniques as Generalized Method of Moment and Fixed Effect Regression on panel data sets of 32 countries in Sub-Saharan Africa over the period 2000-2012. Findings: The variable of interest, corruption, retains its expected positive sign and statistically significant across all the estimations. The relationship remains very strong even when other equally important institutional variables such as regime durability, rule of law and independence of the executive are taken into account. This suggests that a higher perception of corruption among public authorities as in bribery, kickbacks in public procurement, embezzlement of public funds, among others facilitates an increase in capital outflow from SSA. The findings further indicate that regime durability and rule of law are important institutional variables that also significantly influence capital flights in SSA. Practical implications: The findings imply that institutional reforms should be encouraged if SSA is to win the war against corruption and by extension against capital flight. There should be a creation of democratic environment and good governance practices that foster stronger governance institutions, decline in corruption and better domestic investment climate to help reverse the high spate of capital flight in the region. Originality/value: The main value of this paper is using the portfolio choice framework to analyze the relationship between capital flight and corruption in the Sub-Saharan African context.
KW - Capital flight
KW - Corruption
KW - Governance
KW - Institutions
KW - Sub-Saharan Africa
UR - http://www.scopus.com/inward/record.url?scp=85038807604&partnerID=8YFLogxK
U2 - 10.1108/JES-10-2016-0212
DO - 10.1108/JES-10-2016-0212
M3 - Article
AN - SCOPUS:85038807604
SN - 0144-3585
VL - 45
SP - 59
EP - 76
JO - Journal of Economic Studies
JF - Journal of Economic Studies
IS - 1
ER -