Drivers of corruption risk and stock market effects: evidence from the defence industry

Pensiero, Domenico and Velayutham, Eswaran and Krishnamurti, Chandrasekhar (2017) Drivers of corruption risk and stock market effects: evidence from the defence industry. In: 8th Conference on Financial Markets and Corporate Governance (FMCG)2017, 19-21 Apr 2017, Wellington, New Zealand.

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Abstract

Since anecdotal evidence indicates that corruption is rampant in the defence sector globally, we examine the drivers of firm level corruption risk in the defence industry. Our empirical results indicate that visibility and shareholding are significant drivers affecting a firm’s corruption risk. Large firms and listed firms have lower corruption risk, other things being equal. Further, higher managerial shareholding is associated with higher level of corruption risk. These results hold even after controlling for country level drivers such as institutional quality, cultural and economic factors. Interestingly, stock markets in developed countries react more negatively around the announcement to firms achieving low corruption risk scores. Firms with low corruption risk experience lower stock price volatility after the disclosure of corruption risk scores. Finally, we also find that the disclosure of corruption risk is associated with an increase in firm level market liquidity.


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Item Type: Conference or Workshop Item (Commonwealth Reporting Category E) (Paper)
Refereed: Yes
Item Status: Live Archive
Additional Information: Files associated with this item cannot be displayed due to copyright restrictions.
Faculty/School / Institute/Centre: Current - Faculty of Business, Education, Law and Arts - School of Commerce (1 July 2013 -)
Faculty/School / Institute/Centre: Current - Faculty of Business, Education, Law and Arts - School of Commerce (1 July 2013 -)
Date Deposited: 09 Dec 2019 01:05
Last Modified: 13 Feb 2020 04:28
Uncontrolled Keywords: Corruption risk, stock market reaction, information asymmetry, market liquidity
Fields of Research : 15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150201 Finance
15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150205 Investment and Risk Management
Socio-Economic Objective: B Economic Development > 90 Commercial Services and Tourism > 9001 Financial Services > 900199 Financial Services not elsewhere classified
Identification Number or DOI: 10.2139/ssrn.2903053
URI: http://eprints.usq.edu.au/id/eprint/34068

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