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Market exit of firms: Does corruption act as grease or sand?

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  • Rajeev K. Goel
  • James W. Saunoris

Abstract

This paper examines whether corruption acts to “grease” or “sand” firms' exit. Corruption could facilitate exit when it is a tax that distorts markets, or it might retard exit when it empowers firms to obtain undue favors. Results, using panel data across US states and considering market exit and firms' death rates as dependent variables, show that greater corruption acts as grease rather than sand in that it facilitates firms' exit/death. In other findings, larger states, greater regulations, and more unemployment contributed to exit, as did some demographic aspects. Higher state minimum wages resulted in firms' death but not exit.

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  • Rajeev K. Goel & James W. Saunoris, 2020. "Market exit of firms: Does corruption act as grease or sand?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(8), pages 1539-1548, December.
    • Handle: RePEc:wly:mgtdec:v:41:y:2020:i:8:p:1539-1548
    DOI: 10.1002/mde.3201
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    1. Rajeev K. Goel & James W. Saunoris, 2022. "Push from the shadows: Does the shadow economy facilitate market exit of firms?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 2955-2966, October.
    2. Nicola Matteucci & Raffaella Santolini & Silvio Di Fabio, 2023. "ICT diffusion in public administrations and business dynamics: Evidence from Italian municipalities," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 94(4), pages 1233-1271, December.
    3. Rajeev K. Goel & Michael A. Nelson, 2021. "Corrupt encounters of the fairer sex: female entrepreneurs and their corruption perceptions/experience," The Journal of Technology Transfer, Springer, vol. 46(6), pages 1973-1994, December.
    4. Malik, Ashish & Froese, Fabian Jintae, 2022. "Corruption as a perverse Innovation: The dark side of digitalization and corruption in international business," Journal of Business Research, Elsevier, vol. 145(C), pages 682-693.

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