Dr. P.K. Jain published in the International Business Review
For release: December 2, 2016
Dr. Pankaj Jain, interim chair of the department of Finance, Insurance, and Real Estate, was recently published in the International Business Review for his paper entitled, "Corruption's impact on foreign portfolio investment." Dr. Jain co-authored the paper with Michael Pagano, Villanova University, and Emre Kuvvet, Nova Southeastern University and former University of Memphis doctoral student.
The authors found that corruption has significant effects on a nation's financial markets through its adverse impact on foreign portfolio investment (FPI). Yet, the effects of corruption on FPI are nonlinear and reverse J-shaped, with intermediate levels of corruption yielding the most negative effects. Highly transparent nations, where a "level playing field" exists between foreign and local investors due to lack of information asymmetries related to corruption, attract the most foreign investment. However, at the margin, very corrupt countries attract more investment than moderately corrupt countries because a "perverse level playing field" in the former countries may put foreigners and locals on an even footing in terms of resolving asymmetric information problems. This nonlinear pattern is consistent with foreign investors' desire to trade in markets where they are not at an informational disadvantage.
The article was also highlighted in the Chicago Tribune and The New York Times.
Click here to read the entire paper.