IDEAS home Printed from https://ideas.repec.org/a/eme/jmlcpp/jmlc-07-2020-0082.html
   My bibliography  Save this article

Exploring the role of corruption and money laundering (ML) on banking profitability and stability: a study of Pakistan and Malaysia

Author

Listed:
  • Qamar Uz Zaman
  • Kinza Aish
  • Waheed Akhter
  • Syed Anees Haidder Zaidi

Abstract

Purpose - The purpose of this paper is to address the effect of corruption and money laundering (ML) on banking profitability and stability. Design/methodology/approach - This study uses the panel data of 72 banks of Pakistan and Malaysia from 2012–2018. This paper uses fixed effect (FE) and random effect (RE) regression techniques for empirical testing and generalized methods of moment (GMM) technique for robustness tests. Findings - This study founds consistent evidence that corruption has a positive and ML has a negative relationship with the banking profitability of Pakistan and Malaysia while the empirical evidence suggests that corruption and ML have a diverse impact on the banking stability of Pakistan and Malaysia. Further, this paper also founds that corruption and ML moderates the relationship between risk and banking profitability and stability. Practical implications - The results reveal that the banks of the highly corrupt environment are more affected by corruption and ML than the least corrupt environment. Thus, it is recommended that the Government of Pakistan should formulate strong anti-corruption and anti-money laundering policies. Originality/value - As per the knowledge of the authors, this research contributes to understanding the role of corruption and money laundering on the stability and profitability of Pakistan and, in general, it is the first attempt investigating the moderating role of corruption and ML between risk and banking profitability and stability.

Suggested Citation

  • Qamar Uz Zaman & Kinza Aish & Waheed Akhter & Syed Anees Haidder Zaidi, 2020. "Exploring the role of corruption and money laundering (ML) on banking profitability and stability: a study of Pakistan and Malaysia," Journal of Money Laundering Control, Emerald Group Publishing Limited, vol. 24(3), pages 525-543, November.
    • Handle: RePEc:eme:jmlcpp:jmlc-07-2020-0082
    DOI: 10.1108/JMLC-07-2020-0082
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/JMLC-07-2020-0082/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/JMLC-07-2020-0082/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/JMLC-07-2020-0082?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Corruption; Money laundering; Banking profitability; Banking stability; Pakistan; Malaysia; C33; D73; G21; G28; G32;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jmlcpp:jmlc-07-2020-0082. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.