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The state of the state – Economic property rights and firm profitability versus corruption. New evidence from the Czech Republic

Author

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  • A.P. Malinowska

    (Center for Social and Economic Research, Al. Jana Pawła II 61b, Warsaw, Poland)

Abstract

Despite significant advances in economic literature on the relationship between graft and economic growth, the consensus in nowhere in sight. The current paper enriches the extant literature on the subject by: 1) extending econometric techniques in an attempt to quantify and model institutional development; and 2) providing novel results on the dynamics between non-standardised and standardised institutional metrics. Utilising a new dataset compiled for 423 publicly quoted Czech, non-financial companies with macroeconomic and institutional metrics, we fashion a dynamic model approximating the interactions between the country's institutional development and firm profits as well as examining the relationship between the Czech corruption and the national institutional framework in the years of 2007–2016. The economic property rights appear to contribute to firm accounting profits- and cash flow-based profitability metrics. As regards the anti-corruption policies, the study's outcomes indicate that improvement in economic property rights could have propelled the positive impact of lax anti-corruption government action and inefficient judiciary on firm profits.

Suggested Citation

  • A.P. Malinowska, 2021. "The state of the state – Economic property rights and firm profitability versus corruption. New evidence from the Czech Republic," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 71(1), pages 117-136, March.
    • Handle: RePEc:aka:aoecon:v:71:y:2021:i:1:p:117-136
    DOI: 10.1556/032.2021.00006
    Note: The author changed her affiliation since the paper was accepted.
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    Keywords

    corruption; institutions; economic property rights; firm profitability; transition economies;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P37 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Legal

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