This paper aims to investigate the effect of corruption on bank profitability.
The paper adopts panel cointegration, differenced generalized method of moments (GMM) and system GMM.
The empirical results show that corruption is important in explaining the profitability of commercial banks in both developed and emerging countries. While it has mixed effects in emerging countries, only positive effect is validated in developed countries.
Macroeconomic measures of corruption are adopted in the study.
The paper contributes to the literature on corruption and bank profitability by reporting evidence from both developed and developing countries. Existing papers have only concentrated on developing countries.
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