Examining the Impact of Corruption on Financial Sector Development in Arab League Countries
Abstract
Arab League Countries have seen major regulatory and financial reforms in the last two decades and during this period these counties have been marred by corruption. In this background, this study explores the impact of corruption on financial sector development in Arab League countries from 2001 to 2020. By using the dynamic panel data estimation technique of the Generalized Method of Moments on a sample of 20 Arab League countries, the study reports its findings. The finding shows that there is a significant negative effect of corruption on financial sector development. These results favor the notion of the “sand the wheels” hypothesis. The findings of this study highlight the insensitiveness of financial development to corruption during Global Financial Crisis (2008). The results also indicate that there is an adverse effect of corruption on financial development after Arab Spring. The study acknowledges the moderation role of rule of law in the relationship between corruption and financial development.
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