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The Impact of Bribery on Firm Performance: Evidence from Central and Eastern European Countries

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  • Anna Kochanova

Abstract

I examine the relation between bureaucratic corruption ('to get things done') and firm performance in Central and Eastern European countries. While previous re- search relies on data from the BEEPS survey, which suffers from excessive non- reporting of corporate performance, I combine the information on bribery practices from the BEEPS with reliable firm performance data from the Amadeus database. The estimates, identified from within-firm variation, suggest that bureaucratic cor- ruption negatively affects both the sales and labor productivity growth of firms. However, conditional on a given level of bribery in a narrowly defined local market, a higher dispersion of firms' bribing behavior within such a market appears to facili- tate firm performance. I provide an explanation for this finding and also investigate the effect of bribery with respect to the heterogeneity of firms in terms of their size, inclusion in the manufacturing or service sector, stability, and countries' overall in- stitutional environments.

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Bibliographic Info

Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp473.

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Date of creation: Dec 2012
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Handle: RePEc:cer:papers:wp473

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Related research

Keywords: bureaucratic corruption; firms' bribing behavior; firm performance; CEE countries;

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References

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Cited by:
  1. World Bank, 2013. "Taking Stock : An Update on Vietnam's Recent Economic Developments," World Bank Other Operational Studies 16731, The World Bank.
  2. Martin Pospisil & Jiri Schwarz, 2014. "Bankruptcy, Investment, and Financial Constraints: Evidence from a Post-Transition Economy," Working Papers, Czech National Bank, Research Department 2014/01, Czech National Bank, Research Department.
  3. Zuzana Fungácová & Anna Kochanova & Laurent Weill, 2014. "Does Money Buy Credit? Firm-Level Evidence on Bribery and Bank Debt," Working Papers of LaRGE Research Center, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg 2014-05, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.

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