Title: Global financial crisis, corruption and financial markets: new evidence from South Asia

Authors: Safdar Husain Tahir; Nausheen Syed; Alia Qadir

Addresses: Lyallpur Business School, Government College University Faisalabad, Faisalabad-38000, Pakistan ' Department of Business Administration Government College Women University, Faisalabad-38000, Pakistan ' Department of Management Sciences, Riphah International University Faisalabad Campus, Faisalabad-38000, Pakistan

Abstract: The study examines the association of financial markets with corruption before (Regime 1) and after (Regime 2) the global financial crisis- 2008. The study sample consists of the financial markets of four South Asian countries, namely, Bangladesh, Sri Lanka, Pakistan, and India. We apply a Markov-switching vector-auto regression model (MSVAR), T-test, ANOVA, and Post Hoc tests to analyse the data ranging from 2003 to 2018. The results reveal a significant positive impact of corruption on market capitalisation in regime 2. In regime 1, this relationship is found to be non-significant. T-Test's findings show different behaviour before and after financial crises in the market capitalisation, corruption perception index, and domestic credit to the private sector. The results show that the market capitalisation of selected countries behaves differently before and after the financial crisis of 2008. The study concludes that the deregulation of financial markets immediately after the financial crisis significantly changes their association with corruption.

Keywords: South Asian economies; financial markets; corruption perception index; deregulations; global financial crisis-2008; market capitalisation; domestic credit to the private sector; MSVAR; Markov-switching vector-auto regression model; post hoc test.

DOI: 10.1504/IJTGM.2022.128358

International Journal of Trade and Global Markets, 2022 Vol.16 No.4, pp.327 - 348

Received: 21 Jul 2020
Accepted: 21 Oct 2021
Published online: 18 Jan 2023 *

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