In the two charts below, the data is divided into developed markets at left (n=24) and emerging/frontier markets at right (n=46). Corruption ranks are on the vertical axes and are the most recent 6-year average for each country (0-100, lowest rank = most corrupt). Average stock price returns for the 1997-2016 period are on the horizontal axes.
NOTE: Stock returns are U.S. dollar, price-only for the S&P free-float, cap-weighted country indices.
Data: Corruption ranks from Transparency International; stock returns from World Bank.
Bottom Line: With such an indifferent relationship between corruption levels and stock returns, it's hard to make the case that international stocks should be avoided because of higher levels of corruption, whether real or perceived. In fact, in emerging and frontier markets, corruption may actually boost returns a bit, on average, for the broadly diversified indexes.
Thoughts on any of this?