Does Corruption Matter? The Impact of Corruption in Share Returns of Listed Industrial Companies in Euro Area

Abstract

Corporate finance literature has devoted much effort in analysing stock returns and in developing models in order to precisely forecast their yields on the market, because of the different useful purposes of these forecasts that animate economic life of countries and corporations. Following a new approach (Bellavite Pellegrini, 2008) in order to measure the relevance of impact of control variables on returns of European stocks since the introduction of Euro and sharing the sample in different portfolios according to different capitalization, this research develops the issues underlined contributing to the identification of a further control variable affecting stock performances: corruption. The goal of this study is an enquiry about the connections between European industrial stock returns and a macroeconomic index of corruption in order to assess the impact of corruption in the performances of listed European industrial companies. This paper is organized as follows: the first paragraph is a brief introduction with an outline of surveys in the Law and Economics literature, paragraph two focuses its attention on data and methodology and paragraph three implements an empirical analysis in order to verify the importance of the above mentioned control variable of corruption in industrial listed companies of European countries. Concluding remarks and some suggestions in order to develop this issue will follow in the last paragraph.