Does corruption affect the impact of financial development on entrepreneurship? Evidence from emerging economies
Does corruption affect the impact of financial development on entrepreneurship? Evidence from emerging economies

Summary/Abstract: Purpose: This study examines the relationship between financial development, corruption, and entrepreneurship in a sample of 21 emerging economies from 2008 to 2020. Methodology: Utilizing the Generalized Method of Moments (GMM) econometric approach, we explore the interactive dynamics between these variables. Results: Our findings indicate that higher levels of corruption are associated with increased entrepreneurial activity in these economies. This can be attributed to the prevalence of corrupt practices, such as bribery, which serve as a means for entrepreneurs to overcome barriers and initiate businesses. Conversely, while financial development has a positive influence on entrepreneurship, its impact is not statistically significant. However, when considering a combined effect of financial development and corruption, a positive net impact is observed. This suggests that corruption can facilitate access to financial resources for entrepreneurs in these emerging economies. These findings support the notion of the “grease the wheels effect”. Conclusion: This study provides valuable insights into the complex interplay between financial accessibility, corruption, and entrepreneurship in emerging economies, informing policymakers and stakeholders on strategies to foster entrepreneurship and drive sustainable economic growth.

• Details
• Contents