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Corruption and Firm Performance

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  • Narek Sahakyan
  • Kyle W. Stiegert

Abstract

Most empirical research on the subject of corruption has found evidence of its deleterious effects on firms, industries, and society in general. Yet the persistence of corruption, which is present in virtually every form of public governance, suggests that the disparate benefits are difficult to unravel and lead to support for the status quo. In this paper, the authors analyze survey data from over 400 Armenian businesses to study the perceived favorability and impact of corruption on firm-level performance. The research relies on the data from two ordered response survey questions on corruption that were collected as part of a broad survey of issues facing firms pertaining to competition and industry structure. The dual role of the perceived favorability and degree of impact of corruption are modeled in a seemingly unrelated bivariate ordered probit framework. We find that corruption is perceived as more favorable among firms that (1) do not face significant competition, (2) are relatively larger, and (3) younger. Personal characteristics of the respondents, except for the level of education, explain neither the perceived favorability nor impact of corruption. The results show that the model has high predictive power. Our results suggest that enforcement of antitrust policies, encouragement of polices that foster competition, and possibly nonprotectionist trade policies will assist in the battle against corruption.

Suggested Citation

  • Narek Sahakyan & Kyle W. Stiegert, 2012. "Corruption and Firm Performance," Eastern European Economics, Taylor & Francis Journals, vol. 50(6), pages 5-27, November.
    • Handle: RePEc:mes:eaeuec:v:50:y:2012:i:6:p:5-27
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    Citations

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    Cited by:

    1. Ozlem KUTLU FURTUNA, 2016. "The Nexus between Discretionary Expenditures and Corruption: Industry Level Perspectives from BRIC and Turkey," Proceedings of Business and Management Conferences 4406932, International Institute of Social and Economic Sciences.
    2. Baumann Florian & Friehe Tim, 2016. "Competitive Pressure and Corporate Crime," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(2), pages 647-687, April.
    3. Bashir Ahmad & Maria Ciupac-Ulici & Daniela-Georgeta Beju, 2021. "Economic and Non-Economic Variables Affecting Fraud in European Countries," Risks, MDPI, vol. 9(6), pages 1-17, June.
    4. Lurdes Martins & Jorge Cerdeira & Aurora A.C. Teixeira, 2020. "Does corruption boost or harm firms’ performance in developing and emerging economies? A firm‐level study," The World Economy, Wiley Blackwell, vol. 43(8), pages 2119-2152, August.
    5. Julita E. Wasilczuk & Katarzyna Stankiewicz, 2022. "It is not OK but it works – unproductive entrepreneurship, the case of Poland," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 35(1), pages 2943-2959, December.
    6. Lee, Mina & Mutlu, Canan & Lee, Seung-Hyun, 2023. "Bribery and Firm Growth: Sensemaking in CEE and Post-Soviet Countries," Journal of International Management, Elsevier, vol. 29(1).
    7. Douglas Barrios & Nikita Taniparti & Ricardo Hausmann & Clement Brenot & Can Soylu & Roukaya El Houda & Ekaterina Vashkinskaya & Felicia Belostecinic & Sophia Henn, 2023. "A Growth Diagnostic of Kazakhstan," CID Working Papers 427, Center for International Development at Harvard University.
    8. Marcus Box & Karl Gratzer & Xiang Lin, 2023. "Self-employment, corruption, and property rights: a comparative analysis of European and CEE economies," SN Business & Economics, Springer, vol. 3(1), pages 1-29, January.
    9. Bassetti, Thomas & Dal Maso, Lorenzo & Lattanzi, Nicola, 2015. "Family businesses in Eastern European countries: How informal payments affect exports," Journal of Family Business Strategy, Elsevier, vol. 6(4), pages 219-233.
    10. Frey Barbara & Škrinjarić Bruno & Budak Jelena, 2022. "Perceptions of Corruption and Informality Among Businesspeople," South East European Journal of Economics and Business, Sciendo, vol. 17(2), pages 49-66, December.
    11. Borlea Sorin Nicolae & Achim Monica Violeta & Miron Monica Gabriela A., 2017. "Corruption, Shadow Economy and Economic Growth: An Empirical Survey Across the European Union Countries," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 27(2), pages 19-32, June.
    12. Dutta, Nabamita & Kar, Saibal & Stivers, Adam, 2023. "Does Economic Freedom Moderate Perceived Corruption for Firms in India?," IZA Discussion Papers 16484, Institute of Labor Economics (IZA).
    13. Răzvan Hoinaru & Daniel Buda & Sorin Nicolae Borlea & Viorela Ligia Văidean & Monica Violeta Achim, 2020. "The Impact of Corruption and Shadow Economy on the Economic and Sustainable Development. Do They “Sand the Wheels” or “Grease the Wheels”?," Sustainability, MDPI, vol. 12(2), pages 1-27, January.
    14. Elena D’Agostino & Marco Alberto De Benedetto & Giuseppe Sobbrio, 2023. "Does the economic freedom hinder the underground economy? Evidence from a cross-country analysis," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(1), pages 319-341, April.
    15. Kalyuzhnova, Yelena & Belitski, Maksim, 2019. "The impact of corruption and local content policy in on firm performance: Evidence from Kazakhstan," Resources Policy, Elsevier, vol. 61(C), pages 67-76.

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