Corruption and Valuation

Transparency International got some media attention last week as the UN declared December 9 "Anti-Corruption Day".  The World Bank also supported this initiative. 

It turns out that Transparency's corruption measures also have investment significance.  Charles Lee and David Ng of Cornell University have done a strong study on the impact of corruption on corporate valuation.  They find that markets punish companies that operate in more corrupt countries by awarding them lower valuation ratios (Price/Book and Price/Earnings).

Socialfunds.com has a good summary of the study, which won last year's Moskowitz Prize.