The Economic Impact of Anti-Corruption Legislation on Foreign Investor Perceptions of Corruption

Abstract

Corruption has increasingly become an international challenge and the coordination of Anti-Corruption Legislation (ACL) and its implementation, a priority for nations. The economic impact of corruption on economic growth, foreign direct investment flows, and international trade is indicated in international research studies. The significant increase in global financial and trade transactions has presented new and increased opportunities for rent-seeking and increased the need for coordinated action against all forms of corruption. The effectiveness of national ACL measures in combatting and reducing corruption in all its forms, remains poorly defined and the extant research inconclusive. This study explores the economic impact of anti-corruption legislative measures on the relationships between nation’s perceptions of corruption and economic performance. The results of this study indicate support for the established relationship between nation’s levels of corruption and economic performance, particularly economic growth and foreign investment. This study also find support for the direct effect of ACL measures on economic growth, even though this is not the primary focus of this research, since the phased introduction of ACL measures is found to reduce the impact of corruption on economic growth. More specifically, this study find support for the moderating impact of resourced and implemented ACL measures on the impact of corruption. The study’s main policy implication suggests that adequately resourced and effectively implemented ACL measures, moderate the relationship between nation’s levels of corruption and their economic performance and therefore reduces the impact corruption has on nation’s economic growth and foreign investment levels.