Does Corruption Increase the risk Premium on the West African Economic Monetary Union (WAEMU) Bond Market?

Mohamed Lamine Mbengue

doi:10.22610/imbr.v5i3.1036

Abstract

We study the relationship between corruption and risk premium in West African Economic Monetary Union (WAEMU) market bond. Our sample consists of bonds through a public offering and private placement. For this research data was collected from the stock exchange (Bourse RÃ©gionale des Valeurs MobiliÃ¨res). Number of bonds, average corruption and average spread analysis was used to analyze the data. Most country in WAEMU states has a corruption index below 3.5. The results show that corruption score has negative effects on economic performance indicators and there was a predominance of private placement debt relative to debt through a public offering.

Highlights

The West African Economic Monetary Union (WAEMU) market bond has been of a renewed interest in recent years
The impact of corruption in determining the risk premium has never been studied in the WAEMU market bond
S is the spread of the bond, C measures the level of corruption of the issuer in a country, X is a vector of macroeconomic variables contributing to the solvency

Summary

Introduction

The West African Economic Monetary Union (WAEMU) market bond has been of a renewed interest in recent years. This paper focuses on the role of corruption in determining the price in WAEMU bond market. The paper focuses on the role of corruption in determining the price in WAEMU market bond. Most studies have focused on which macroeconomic factors contribute to the likelihood of sovereign default (see, for example Edward, 1984; Eichengreen & Mody, 1998).Who in a series of papers uses spread of emerging market. Mobilizing tax revenue remains a preoccupation; the ratio is consistently 2.5 points below the average level of countries termed “fragile African states” and of West African Economic and Monetary Union states. Corruption plays an important role in determining the default risk, regardless of its impact on other types of economic performance. The impact of corruption in determining the risk premium has never been studied in the WAEMU market bond. Last segment related to recommendations and conclusions of the study

Literature Review

The Theoretical and Methodology Framework

Empirical approach

Findings

Discussion

Conclusion and Recommendations