Corruption as a Key Transmission Channel Linking Governance and Investor Protection in ASEAN

Muhammad Firmansyah; Sri Budi Cantika Yuli; Fika Fitriasari; Zainal Arifin; Stanislaw Flejterski

doi:10.15408/etk.v25i1.50211

Authors

Muhammad Firmansyah Universitas Muhammadiyah Malang
Sri Budi Cantika Yuli Universitas Muhammadiyah Malang
Fika Fitriasari Universitas Muhammadiyah Malang
Zainal Arifin Universitas Muhammadiyah Malang
Stanislaw Flejterski Faculty of Szczecin, University WSB Merito Poznan

DOI:

https://doi.org/10.15408/etk.v25i1.50211

Keywords:

corruption control, institutional quality, investor protection index, macroeconomic stability, portfolio investment flows

Abstract

Research Originality: The Originality lies in integrating governance quality and macroeconomic variables within a unified framework while explicitly modeling corruption as a mediating variable, a focus that remains underexplored in prior studies.

Research Objectives: This study examines the role of corruption as a transmission mechanism linking governance and macroeconomic factors to investor protection in ASEAN countries.

Research Method: Using panel data from six ASEAN countries over the period 2010–2023, this study applies panel-data-based path analysis with bootstrapping to estimate both direct and indirect effects. Robustness checks are conducted using fixed-effects, random-effects, and System GMM estimators to ensure the consistency of the results.

Empirical Results: The findings show that governance significantly enhances investor protection, while portfolio investment and interest rates exhibit varying effects depending on institutional conditions. Importantly, corruption is found to play a significant mediating role, indicating that improvements in governance and macroeconomic performance do not automatically strengthen investor protection without effective corruption control.

Implications: This study suggests that policymakers should integrate governance reforms with anti-corruption strategies to improve investor protection. Strengthening institutional quality, transparency, and regulatory enforcement is essential to create a more secure and sustainable investment environment in ASEAN economies.

JEL Classification: D73, G38, F21, E44

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