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Control of Corruption, Regulatory Quality, Political Stability and Environmental Sustainability: a Cross-National Analysis

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Control of Corruption, Regulatory Quality, Political Stability and Environmental Sustainability: a Cross-National Analysis Journal of Accounting Auditing and Business - Vol.1, No.2, 2018 10.24198/jaab.v1i2.18344 Control of Corruption, Regulatory Quality, Political Stability and Environmental Sustainability: A Cross-National Analysis Sofik Handoyo Faculty of Economics and Business Universitas Padjadjaran Fury Khristianty Fitriyah Faculty of Economics and Business Universitas Padjadjaran Abstract: The study aims to reveal the correlation between governance attributes of the government and national environmental sustainability. The governance attributes of government in this study refer to the index of control of corruption, regulatory quality, and political stability. Meanwhile, national environmental sustainability refers to the index of national environmental performance. The period of investigation is the year of 2014 and involves 177 countries. Person correlation analysis was applied in this study to identify the degree of correlation between independent variables (control of corruption, regulatory quality, and political stability) dependent variable (environmental sustainability). Independent variables were measured using the World Governance Index (WGI) published by the World Bank. Environmental Performance Index (EPI) issued by The Yale Center for Environmental Law & Policy (YCELP) was proxied for measuring environmental sustainability. The results indicate that the state’s control of corruption, the national regulatory quality, and national political stability are positively associated with national environmental sustainability. The correlation coefficients are 0.230 (p<0.01), 0.193 (p<0.01), and 0.167 (p<0.01), respectively. Even though there is a positive correlation between public governance attributes and national environmental sustainability, however, the degree of correlation is weak. It implies that national governance is not a powerful instrument to predict national environmental sustainability. Keywords: Control of corruption; Regulatory quality; Political stability; Environmental sustainability, Introduction discussion among nations and corporations. They have the same concern, saving the In recent decades it has become earth from the negative impact of evident that environmental degradation is a industrialization and nature exploitation. In growing problem with implications for order to support the population’s life in the poverty reduction as well as for the health future, the environment must be prevented of ecosystems (Sundström, 2013). from further destruction. Therefore, Environmental issues are being an intense economic development activities should http://jurnal.unpad.ac.id/jaab – ISSN: 2614-3844 28 Journal of Accounting Auditing and Business - Vol.1, No.2, 2018 10.24198/jaab.v1i2.18344 also consider environmental sustainability. Many factors are contributing to the Environmental sustainability is one of the achievement of environmental main points of Millennium Development sustainability goals. However, internal Goals (MDGs) initiated by United of factors such as the ability of the state to Nations on Millennium Summit occasion in combat corruption, the regulatory quality, 2000. The milestone of the environmental and domestic political stability are believed protection movement by global playing a significant role in determining communities was started in 1992, resulting successful environmental sustainability Kyoto Protocol, governing about goals. greenhouse gases reduction. Following Corruption is the typical negative Kyoto occasion, in the same year, Earth behavior of the national official associated Summit in Rio de Janerio released agenda with the failure to achieve sustainable 21 of sustainability development. Those development. Bribery from the private events initiated by United nations implies sector to the official government is a classic that environmental issues are crucial for example of corruption among state international communities and challenges officials. Plenty of anecdotal evidence to be faced collectively (Scruggs,1999). suggests that corruption harms the The thinking of environment environment; bribery assists the poaching sustainability is driven by a general of rhinos in protected savannas and enables understanding of global communities that the illegal logging of timber in tropical the earth is no longer a friendly place for forest reserves (Sundström, 2013). Issuing living. Sustainable development provides a business permits that are endangering framework for humans to live and prosper population and environment, neglecting in harmony with nature rather than living, fines for a business practice that are as we have done for centuries, at nature‟s ignoring the environmental law and expense (Dernbach and Mintz, 2011). regulations, giving easy sanctions and Many economic activities, especially punishment for any actions against the industrialization and natural resources environmental law and regulations are exploitation, are believed causing common practice that is believed involving deterioration of environmental quality. bribery. Impact of bribery is very Global warming, the ozone layer’s significantly related to sustainable depletion, natural disaster, climate changes development. Therefore, the ability of the are the harmful impact of irresponsible state to control corruption practice will economic activities (Fiorino, 2010). determine whether sustainable Industrialization and natural resources development can be achieved or not. Even exploitation in one side is benefiting the though there are many assumed cause- state, the other side, it will harm effect relationships between corruption and environmental if it is not managed environmental sustainability, however, carefully. In this case, national involvement there are still few empirical analyses as the regulator is very pivotal in achieving (Morse, 2006). Therefore, further environmental sustainability. quantitative research about the influence of Environmentally friendly industrialization corruption and environmental sustainability is effectively practiced if the state has a full needs to be conducted. commitment to doing it. However, it is not an easy duty to be conducted by the state. http://jurnal.unpad.ac.id/jaab – ISSN: 2614-3844 29 Journal of Accounting Auditing and Business - Vol.1, No.2, 2018 10.24198/jaab.v1i2.18344 Sustainability development is a unstable domestic politic condition, it will vision of global communities to be take consequences of national priority in achieved. However, to achieve sustainable conducting national development, in this development, infrastructure such as case, environmental development sufficient regulatory should be in place. Regulation, one of the three fundamental levers of state power (together with fiscal Literature Review and Hypothesis and monetary policy), is of critical Development importance in shaping the welfare of economies and society (OECD, 2010). The Control of corruption dan Environmental regulatory should have good quality and Sustainability enforcement power that make business practice aware of environmental issues. World Bank defines corruption as the abuse of public power for private gain. Regulatory quality is reflected by its Corruption, in its various forms, is effectiveness to achieve the purposes of generally believed to be an obstacle to regulation itself. In this case, the intended economic development (Aidt, 2009). purpose is environmental protection. Public Corruption undermines democracy and awareness of environmental issues in reduces economic growth, and it diverts proposing good quality of regulation will be public funds to serve the private interests of a crucial factor in achieving environmental some public officials (Winbourne, 2002). sustainability. By having a good quality of Corruption “has distorted development environmental law and regulation, the law priorities, led to massive human and and regulation will have the power to force financial capital flight, and undermined stakeholder from any actions that lead to social and political stability (Doig and environmental destruction. McIvor (1999). Robust evidence that corruption, as opposed to general Ability to achieve environmental government inefficiency, has a sizable sustainability is typically also influenced by negative effect on growth in real GDP per domestic factors. One of the crucial factors capita (Aidt, 2009). Rampant corruption determines the achievement of can put an economy on an unsustainable environmental sustainability is domestic path along which its capital base is being political stability. Domestic political eroded. stability will determine the national The theoretical accounts for why priority, such as budget allocation and corruption harms the environment are quite management of the government. vague, mainly consisting of two strands of Environmental issues may not get sufficient explanations. One is focused on the content attention if the domestic political situation of rules, arguing that corruption affects the is unstable. The states may more focus on substantial stringency of environmental activities to stabilize the domestic politic regulations, as bribery shapes policy in corrupt societies. Another explanation situation than that of taking care of instead focuses on that corruption hampers environmental issues. Neglecting law enforcement, thus allowing emitters to environmental issues are found in many evade the responsibility of pollution or countries involved in an unstable domestic encouraging the overexploitation of politic condition such as civil war, resources (Sundström,
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