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What Determines the Return to Bribery? Evidence from Corruption Cases Worldwide

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  • Yan-Leung Cheung

    (Education University of Hong Kong, Hong Kong, China)

  • P. Raghavendra Rau

    (University of Cambridge, Cambridge CB2 1TN, United Kingdom)

  • Aris Stouraitis

    (Hong Kong Baptist University, Hong Kong, China)

Abstract

We analyze a hand-collected sample of bribery cases from around the world to describe how the payment of bribes affects shareholder value. The net present value of a bribe conditional on getting caught is close to zero for the median firm in our sample. However, controlling for industry, country, and firm characteristics, a $1 increase in the size of the bribe is associated with an ex ante $6–$9 increase in the value of the firm, suggesting a correlation between the size of bribes and the size of available benefits. Proxies for information disclosure appear significant in explaining these benefits with more disclosure associated with lower benefits. However, this result is driven by democratic countries where bribe-paying firms receive smaller benefits relative to the bribes they pay. Information disclosure is not significant in autocratic countries.

Suggested Citation

  • Yan-Leung Cheung & P. Raghavendra Rau & Aris Stouraitis, 2021. "What Determines the Return to Bribery? Evidence from Corruption Cases Worldwide," Management Science, INFORMS, vol. 67(10), pages 6235-6265, October.
    • Handle: RePEc:inm:ormnsc:v:67:y:2021:i:10:p:6235-6265
    DOI: 10.1287/mnsc.2020.3763
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