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Too risk averse to stay honest?: Business corruption, uncertainty and attitudes toward risk

  • Søreide, Tina

The presence of business-corruption provokes firms to make choices between legal business approaches and illegal bribery. The outcome of a chosen strategy will usually be uncertain at the time the decision is made, and a firm's decision will depend partly on its attitude towards risk. Drawing on empirical results about business corruption, this paper describes the risks, uncertainties and benefits attached to bribery, and specifies their impact on firms' propensity to offer bribes. It then demonstrates how risk averse firms can be more inclined to offer bribes than risk neutral and risk attracted firms.

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Article provided by Elsevier in its journal International Review of Law and Economics.

Volume (Year): 29 (2009)
Issue (Month): 4 (December)
Pages: 388-395

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Handle: RePEc:eee:irlaec:v:29:y:2009:i:4:p:388-395
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  1. Steven Shavell & A. Mitchell Polinsky, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March.
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  13. Knack, Stephen, 2006. "Measuring corruption in Eastern Europe and Central Asia : a critique of the cross-country indicators," Policy Research Working Paper Series 3968, The World Bank.
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  16. Skaperdas, S., 1990. "Conflict And Attitudes Toward Risk," Papers 90-91-05, California Irvine - School of Social Sciences.
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  18. Clarke, George R. G. & Lixin Colin Xu, 2002. "Ownership, competition, and corruption : bribe takers versus bribe payers," Policy Research Working Paper Series 2783, The World Bank.
  19. Skaperdas, Stergios & Gan, Li, 1995. "Risk Aversion in Contests," Economic Journal, Royal Economic Society, vol. 105(431), pages 951-62, July.
  20. Kenny, Charles, 2006. "Measuring and reducing the impact of corruption in infrastructure," Policy Research Working Paper Series 4099, The World Bank.
  21. Lambsdorff, Johann Graf, 2002. "Corruption and Rent-Seeking," Public Choice, Springer, vol. 113(1-2), pages 97-125, October.
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