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Effect of quality of governance on the relationship between illicit financial flows and economic growth

Hazlina Mohd Padil (Faculty of Law, Universiti Teknologi MARA, Cawangan Negeri Sembilan, Kampus Seremban, Seremban, Malaysia)
Eley Suzana Kasim (Accounting Research Institute, Universiti Teknologi MARA, Shah Alam, Malaysia)
Fazlida Mohd Razali (Accounting Research Institute, Universiti Teknologi MARA, Shah Alam, Malaysia)
Ruhaya Atan (Accounting Research Institute, Universiti Teknologi MARA, Shah Alam, Malaysia)
Haziq Aminullah (The School of Social Sciences, The University of Manchester, Manchester, UK)

Journal of Financial Crime

ISSN: 1359-0790

Article publication date: 22 November 2021

Issue publication date: 30 September 2022

246

Abstract

Purpose

The purpose of this paper is twofold. First, the study aims to examine the direct effect of illicit financial flows (IFF) and quality of governance (QoG) on economic growth. Second, this study seeks to examine the moderating effect of QoG on the economic consequences of IFF.

Design/methodology/approach

This study collected data from nine The Association of Southeast Asian Nations (ASEAN) countries for the period of 10 years from 2008 to 2019. The study concerned an analysis of the testing of a conceptual framework which based on secondary data which may lack a comprehensive substantiation on the grounds of measurement theory. A partial least squares (PLS) modelling using the SmartPLS 3.2.8 version was used as a statistical tool to examine the measurement and structural model.

Findings

Key findings provide empirical support on the effect of IFF and QoG on economic growth. It also confirmed that QoG significantly moderated the relationship between IFF and economic growth by reducing the negative impact of IFF on economic growth.

Practical implications

Immediate corrective action needs to be implemented by policymakers of ASEAN countries to strengthen QoG to effectively curb IFF activities.

Originality/value

This study provides current empirical evidence on the relationship of IFF, QoG and economic growth within ASEAN countries.

Keywords

Acknowledgements

The authors would like to acknowledge the support given by Accounting Research Institute of Universiti Teknologi MARA, Malaysia through a research grant award (Project code: 600-RMC/ARI 5/3(015/2020). The authors’ gratitude is also extended to all parties who are directly or indirectly involved in completing the research project.

Citation

Mohd Padil, H., Kasim, E.S., Mohd Razali, F., Atan, R. and Aminullah, H. (2022), "Effect of quality of governance on the relationship between illicit financial flows and economic growth", Journal of Financial Crime, Vol. 29 No. 4, pp. 1382-1395. https://doi.org/10.1108/JFC-10-2021-0226

Publisher

:

Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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