Corruption risk and stock market effects: evidence from the defence industry
Article
Article Title | Corruption risk and stock market effects: evidence from the defence industry |
---|---|
ERA Journal ID | 32913 |
Article Category | Article |
Authors | Krishnamurti, Chandrasekhar (Author), Pensiero, Domenico (Author) and Velayutham, Eswaran (Author) |
Journal Title | Pacific-Basin Finance Journal |
Journal Citation | 70, pp. 1-19 |
Article Number | 101681 |
Number of Pages | 19 |
Year | 2021 |
Publisher | Elsevier |
Place of Publication | Netherlands |
ISSN | 0927-538X |
Digital Object Identifier (DOI) | https://doi.org/10.1016/j.pacfin.2021.101681 |
Web Address (URL) | https://www.sciencedirect.com/science/article/pii/S0927538X21001888 |
Abstract | Motivated by the finding that corruption is rampant in the defence sector globally, we examine the stock market effects of firm-level corruption risk disclosure in the defence industry. We find that the disclosure of corruption risk scores have information content. Our multivariate tests show that the market reacts negatively to firms that have low corruption risk. Our study supports the ‘greasing the wheels’ hypothesis which suggests that corruption is a cost of doing business. Further, companies with low corruption risk experience lower stock price volatility after the disclosure of corruption risk scores. Finally, we also find that the disclosure of lower corruption risk is associated with an increase in firm-level market liquidity. |
Keywords | corruption risk; stock market reaction; information asymmetry; market liquidity |
Contains Sensitive Content | Does not contain sensitive content |
ANZSRC Field of Research 2020 | 350299. Banking, finance and investment not elsewhere classified |
350202. Finance | |
Public Notes | File reproduced in accordance with the copyright policy of the publisher/author. |
Byline Affiliations | University of South Australia |
School of Business | |
Institution of Origin | University of Southern Queensland |
https://research.usq.edu.au/item/q6xxq/corruption-risk-and-stock-market-effects-evidence-from-the-defence-industry
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