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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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    More about this item

    Keywords

    Corruption; Tax evasion; CEO; Firm performance;
    All these keywords.

    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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