Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

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

Exploring the role of corruption and money laundering (ML) on banking profitability and... The purpose of this paper is to address the effect of corruption and money laundering (ML) on banking profitability and stability.Design/methodology/approachThis 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.FindingsThis 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 implicationsThe 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/valueAs 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Money Laundering Control Emerald Publishing

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

Download PDF
19 pages

Loading next page...
 
/lp/emerald-publishing/exploring-the-role-of-corruption-and-money-laundering-ml-on-banking-J06EiAzctF
Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1368-5201
eISSN
1368-5201
DOI
10.1108/jmlc-07-2020-0082
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to address the effect of corruption and money laundering (ML) on banking profitability and stability.Design/methodology/approachThis 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.FindingsThis 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 implicationsThe 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/valueAs 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.

Journal

Journal of Money Laundering Control – Emerald Publishing

Published: Jul 23, 2021

Keywords: Corruption; Money laundering; Banking profitability; Banking stability; Pakistan; Malaysia; C33; D73; G21; G28; G32

References

  • The impact of bank size and funding risk on bank stability
    Adusei, M.
  • Exploring the role of risk and corruption on bank stability: evidence from Pakistan
    Ali, M.; Sohail, A.; Khan, L.; Puah, C.H.
  • The impact of money laundering on economic and financial stability and on political development in developing countries: the case of Nigeria
    Aluko, A.; Bagheri, M.
  • Another look at the instrumental variable estimation of error-components models
    Arellano, M.; Bover, O.
  • Impact of corruption on bank profitability: an analysis of Islamic banks
    Arshad, S.; Rizvi, S.A.R.
  • The impact of economic freedom, business regulation and corruption on bank profitability and bank stability: evidence from Europe
    Asteriou, D.; Pilbeam, K.; Tomuleasa, I.
  • The cancer of corruption
    Bhargava, V.
  • Assessing the introduction of anti-money laundering regulations on bank stock valuation: an empirical analysis
    Blani, H.
  • The effect of corruption on bank profitability
    Bolarinwa, S.T.; Soetan, F.
  • How corruption affects loan portfolio quality in emerging markets?
    Bougatef, K.
  • Corruption and bank risk-taking: evidence from emerging economies
    Chen, M.; Nam, B.; Wang, R.; Wu, J.
  • The determinants of commercial banking profitability in low-, middle-, and high-income countries
    Dietrich, A.; Wanzenried, G.
  • Liquidity risk, credit risk and stability in Islamic and conventional banks
    Hassan, M.K.; Khan, A.; Paltrinieri, A.
  • Do anticorruption efforts affect banking system stability?
    Ho, K.; Ma, J.Z.; Yang, L.; Shi, L.
  • Media ownership, concentration and corruption in bank lending
    Houston, J.F.; Lin, C.; Ma, Y.
  • Bank profitability and economic growth
    Klein, P.O.; Weill, L.
  • Regulatory capital and stability of Islamic and conventional banks
    Korbi, F.; Bougatef, K.
  • Legal determinants of external finance
    Lopez-de-Silanes, F.; La Porta, R.
  • Impact of corruption on banking sector stability: evidence from Middle East and North African countries
    Mohammad, A.R.; Helmi, M.; Hidthiir, B.; Bin, A.; Nor, M.
  • Anti-money laundering disclosures and banks’ performance
    Nobanee, H.; Ellili, N.
  • Resolution 1943 (2013) - corruption as a threat to the rule of law
  • Corruption, soundness of the banking sector, and economic growth: a cross-country study
    Park, J.
  • How to do xtabond2: an introduction to difference and system GMM in Stata
    Roodman, D.
  • Money laundering with particular reference to the banking deposit transactions an Islamic perspective
    Sanusi, M.M.
  • Anti-money laundering developments in Iran do Iranian banks have an integrated framework
    Slahi, M.; Molla Imeny, V.
  • Corruption and saving in a panel of countries
    Swaleheen, M.
  • Corruption and banking stability: evidence from emerging economies
    Toader, T.; Onofrei, M.; Popescu, A.I.; Andrieș, A.M.
  • Anti-money laundering practices in banks: customer’s awareness and acceptance in India
    Viritha, B.; Mariappan, V.
  • Bank specific and macroeconomics dynamic determinants of credit risk in Islamic banks and conventional banks
    Waemustafa, W.; Sukri, S.
  • Do Islamic banks have greater market power?
    Weill, L.
  • Bank profitability and financial stability
    Xu, T.; Hu, K.; Das, U.S.