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The Impact of Corruption & Transparent Regulations on Investment Outcomes

A new Foglamp whitepaper explores the impact of corruption and transparent regulations on specific investment outcomes. Authored by Global Integrity Managing Director Nathaniel Heller, the paper examines the role of corruption and information transparency in emerging and frontier markets.

Among the key findings:

(1) Half of the total risks in emerging and frontier markets may be linked to fraud, corruption, and discretion in the regulatory system.

(2) Corruption is not monolithic; it is highly country-, industry-, company-, and deal-specific.

(3) In many emerging and frontier markets, corruption is believed to have a tax effect upwards of 20%, reducing firm productivity by nearly 70% and stifling earnings.

(4) Data used by most investors are simple aggregates of imprecise country- and region-specific studies and are flawed for three reasons:

  • They are unreliable for making comparisons between countries because the studies used as data inputs vary by country, despite being portrayed as comparable;
  • They are unreliable for tracking change over time because the actual inputs change each year despite the aggregate data being portrayed as comparable;
  • It is impossible to tell what these data are actually measuring, as each study and each survey defines “corruption” differently.

    • (5) A new wave of corruption metrics and assessments are being developed utilizing local country experts to better identify specific, actionable corruption risks and undervalued opportunities.

    Download the full whitepaper: Why Corruption, Regulation and Governance Matter to Investors in Emerging Markets (and Why You Know Less Than You Think You Do)