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Money laundering and infrastructure quality: the moderating effect of the strength of auditing and reporting standards

Money laundering and infrastructure quality: the moderating effect of the strength of auditing... This paper aims to examine the association between money laundering and infrastructure quality and whether the strength of auditing and reporting standards (SARS) moderates this association.Design/methodology/approachThe sample includes 348 country-year observations over the period of 2015–2017. The authors use Basel Anti-Money Laundering reports for 2015, 2016 and 2017 to collect data concerning money laundering. Infrastructure quality and the remaining variables are gathered from the Global Competitiveness reports for the same years.FindingsResults show that money laundering is negatively associated with infrastructure quality. This negative association remains stable for countries characterised by low SARS, while it becomes less pronounced for countries with high SARS. Additional tests for the moderating impact of the SARS, using an interaction term between money laundering and SARS dummy variable, confirm that high SARS mitigates the adverse effect of money laundering on infrastructure quality.Originality/valueThese findings are important for policymakers, as they put emphasis on the adverse effect of money laundering and financial crimes on infrastructure quality and how solid auditing and reporting standards may improve infrastructure quality and reduce the negative effect of money laundering on the same variable. Thus, strengthening legislations concerning auditing and reporting standards in one country may improve infrastructure quality and combat money laundering and its adverse impacts. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Pacific Accounting Review Emerald Publishing

Money laundering and infrastructure quality: the moderating effect of the strength of auditing and reporting standards

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References (25)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0114-0582
eISSN
0114-0582
DOI
10.1108/par-02-2022-0029
Publisher site
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Abstract

This paper aims to examine the association between money laundering and infrastructure quality and whether the strength of auditing and reporting standards (SARS) moderates this association.Design/methodology/approachThe sample includes 348 country-year observations over the period of 2015–2017. The authors use Basel Anti-Money Laundering reports for 2015, 2016 and 2017 to collect data concerning money laundering. Infrastructure quality and the remaining variables are gathered from the Global Competitiveness reports for the same years.FindingsResults show that money laundering is negatively associated with infrastructure quality. This negative association remains stable for countries characterised by low SARS, while it becomes less pronounced for countries with high SARS. Additional tests for the moderating impact of the SARS, using an interaction term between money laundering and SARS dummy variable, confirm that high SARS mitigates the adverse effect of money laundering on infrastructure quality.Originality/valueThese findings are important for policymakers, as they put emphasis on the adverse effect of money laundering and financial crimes on infrastructure quality and how solid auditing and reporting standards may improve infrastructure quality and reduce the negative effect of money laundering on the same variable. Thus, strengthening legislations concerning auditing and reporting standards in one country may improve infrastructure quality and combat money laundering and its adverse impacts.

Journal

Pacific Accounting Review – Emerald Publishing

Published: Feb 28, 2023

Keywords: Money laundering; SARS; Strength of auditing and reporting standards; Infrastructure quality

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