Measuring the Effect of Corruption on Sovereign Bond Ratings
AbstractInstrumenting for sovereign corruption, we find that Transparency International's Corruption Perceptions Index which 'ranges from 10 (highly clean) to 0 (highly corrupt)', is a significant predictor of the Standard and Poor's sovereign bond ratings ranging from 1 (Sovereign Default) to 22 (AAA) in panel data from 52 countries from 1993 to 2002. Corruption downgrades the creditworthiness of sovereign bonds by diverting loan proceeds from productive projects to less productive ones, if not to offshore accounts. In particular, a one point worsening of the corruption perception index leads to an estimated one-notch reduction out of 22 in the sovereign bond rating.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Journal of Economic Policy Reform.
Volume (Year): 10 (2007)
Issue (Month): 4 ()
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- Bastien Drut, 2009.
"Sovereign Bonds and Socially Responsible Investment,"
Working Papers CEB
09-014.RS, ULB -- Universite Libre de Bruxelles.
- Bastien Drut, 2010. "Sovereign Bonds and Socially Responsible Investment," Journal of Business Ethics, Springer, vol. 92(1), pages 131-145, April.
- Bastien Drut, 2009. "Sovereign Bonds and Socially Responsible Investment," EconomiX Working Papers 2009-17, University of Paris West - Nanterre la Défense, EconomiX.
- Carmelo León & Jorge Araña & Javier León, 2013. "Correcting for Scale Perception Bias in Measuring Corruption: an Application to Chile and Spain," Social Indicators Research, Springer, vol. 114(3), pages 977-995, December.
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