Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/195516 
Year of Publication: 
2018
Citation: 
[Journal:] Contemporary Economics [ISSN:] 2300-8814 [Volume:] 12 [Issue:] 2 [Publisher:] University of Finance and Management in Warsaw, Faculty of Management and Finance [Place:] Warsaw [Year:] 2018 [Pages:] 139-152
Publisher: 
University of Finance and Management in Warsaw, Faculty of Management and Finance, Warsaw
Abstract: 
Economic growth has traditionally been attributed to the accumulation of human and physical capital and the increased productivity arising from technological innovation. The quest to attract physical capital led to the design and implementation of policies and the building of institutions by governments of developing countries to create a congenial investment environment to attract foreign investors. The multinational corporations operating in these developing countries take advantage of these policies to profit from these countries in terms of capital through both legal and fraudulent activities. For governments and stakeholders to be able to fight this menace of illicit financial outflow, there is a need for a comprehensive scrutiny of the quality of governance indicators that enhance the activities of these multinational companies. Therefore, this study seeks to explore the influence of cross-country indicators of governance on the illicit financial flow from developing countries. This study is based on secondary data (panel) derived from the Global Financial Integrity, World Development Indicators and Worldwide Governance Indicators. The total number of developing countries included in the analysis is 139, and 1562 observations are included. Using the multilevel estimation approach, the study finds that regulatory quality has a negative and significant influence on the illicit financial flow, while government effectiveness, corruption and FDI net inflows have a significant positive effect. This finding calls for developing countries to design and implement sound policies, build effective and accountable institutions, control corruption and enhance regulatory quality to control this issue.
Subjects: 
illicit financial outflow
foreign direct investment
government effectiveness
corruption
regulatory quality
JEL: 
F18
F23
F20
F30
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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