An Analysis of the Relationship between Regulatory Control and Corruption based on Product and Market Regulation and Corruption Perceptions Indices

This paper focuses on the relationship between two important business indices: the degree to which a country's business is centrally regulated, and the level of business corruption perceived in that country. The main purpose and methodology is to analyze the data from 47 globally dispersed countries based on the Organization for Economic Co-operation and Development (OECD) Product and Market Regulation Index and Transparency International's Corruption Perceptions Index from 2013. The statistical methodology using regression analysis demonstrates that there is a significant negative relationship between levels of perceived corruption and levels of regulation. This paper empirically confirms that corruption tends to increase with low levels of regulations. The results of this study can be useful for policy makers, managers, and research; as such, the authors provide appropriate recommendations for policy-makers and business leaders. While there are examples from several countries in this paper, the authors provide many sources and literature from the United States as most readers can easily relate to them. The limitations of the study and suggestions for future research are also stated. Overall, the findings of this study show that more product market regulation is a significant factor in demonstrating less perceived corruption for the 47 countries selected for this research. Our results demonstrate that countries with high levels of regulation have low perceived levels of corruption. In this focused empirical study, the authors found that more regulation is associated with less perceived corruption. So, what explanations might be advanced? Perhaps the answer lies in the ability of business regulation to actually make a difference in the level of corruption, even presuming there is a desire to do so. If we assume it is desirable to reduce the level of corporate corruption, and that one of the mechanisms to achieve this objective is through sensible business regulation, this study has demonstrated that countries with high levels of regulation seems to have low perceived levels of corruption.