The influence of national leader change on corruption and sovereign rating

Abstract

Corruption is a critical social and ethical problem that can impede the economic growth of a country or even ruin a country. In addition, the importance of the sovereign rating of a country cannot be underestimated. A change in the sovereign rating of a country can affect its borrowing capacity. Using members of the United Nations from 1995 to 2012 as the research sample, this study investigated the influence of national leader change on corruption and sovereign rating by analyzing one year after the change in national leadership. The results showed that national leader change exerted a significant, positive effect on the degree of corruption and the sovereign rating one year after the change in national leadership. By including national characteristics, this study found that for countries that have adopted the semipresidential system, national leader change had a significant, negative effect on the degree of corruption and the sovereign rating. For extreme human development countries, national leader change had a significant, negative effect on the degree of corruption but did not significantly affect the sovereign rating. The results of this study can serve as a reference for investors engaged in international investment decision-making.