Corruption and International Valuation: Does Virtue Pay?
Posted: 22 May 2019
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Corruption and International Valuation: Does Virtue Pay?
Corruption and International Valuation: Does Virtue Pay?
Date Written: September 25, 2006
Abstract
Using firm-level data from 44 countries, we investigate the relation between corruption and international corporate values. Our analysis shows that firms from more corrupt countries trade at significantly lower market multiples. The effect is both economically and statistically significant. Furthermore, using a two-stage estimation procedure, we show that corruption impacts firm value primarily through lower expected future cash flows, most directly captured by firms' profitability forecasts. Collectively, our evidence shows corruption has significant economic consequences for shareholder value.
Keywords: Corruption, International Valuation
JEL Classification: F30
Suggested Citation: Suggested Citation
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