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Should one hire a corrupt CEO in a corrupt country?

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  • Mironov, Maxim

Abstract

This paper examines the interaction between the propensity to corrupt (PTC) and firm performance. Using a unique data set of Moscow traffic violations, I construct the PTC of every Muscovite with a driver׳s license. Next, I determine the PTC for the top management of 58,157 privately held firms. I find that a 1 standard deviation increase in management PTC corresponds to a 3.6% increase in income diversion and that firms with corrupt management significantly outperform their counterparts. This study contributes to the literature that characterizes corruption using objective (instead of perception-based) measures and provides evidence regarding the positive aspects of corruption at the firm level.

Suggested Citation

  • Mironov, Maxim, 2015. "Should one hire a corrupt CEO in a corrupt country?," Journal of Financial Economics, Elsevier, vol. 117(1), pages 29-42.
  • Handle: RePEc:eee:jfinec:v:117:y:2015:i:1:p:29-42
    DOI: 10.1016/j.jfineco.2014.03.002
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    References listed on IDEAS

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    1. repec:eee:jfinec:v:127:y:2018:i:2:p:389-415 is not listed on IDEAS
    2. repec:eee:corfin:v:51:y:2018:i:c:p:125-141 is not listed on IDEAS
    3. repec:eee:jeborg:v:142:y:2017:i:c:p:226-240 is not listed on IDEAS
    4. Hanousek, Jan & Shamshur, Anastasiya & Tresl, Jiri, 2015. "Is bread gained by deceit sweet to a man? Corruption and firm efficiency," CEPR Discussion Papers 10951, C.E.P.R. Discussion Papers.
    5. repec:eee:finana:v:54:y:2017:i:c:p:87-94 is not listed on IDEAS
    6. repec:eee:jcecon:v:47:y:2019:i:1:p:31-49 is not listed on IDEAS
    7. Petr Houdek & Petr Koblovský, 2016. "Behavioural Finance and Organisations: A Review," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2016(2), pages 33-45.
    8. repec:eee:jfinec:v:126:y:2017:i:3:p:516-542 is not listed on IDEAS
    9. Jan Hanousek & Anastasiya Shamshur & Jiri Tresl, 2017. "Firm Efficiency, Foreign Ownership and CEO Gender in Corrupt Environments," CERGE-EI Working Papers wp595, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    10. Pietro A. Bianchi & Antonio Marra & Donato Masciandaro & Nicola Pecchiari, 2017. "Is It Worth Having the Sopranos on Board? Corporate Governance Pollution and Organized Crime: The Case of Italy," BAFFI CAREFIN Working Papers 1759, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.

    More about this item

    Keywords

    Corruption; Tax evasion; CEO; Firm performance;

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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