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Corruption and Firm Performance


  • Narek Sahakyan
  • Kyle W. Stiegert


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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    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. 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.

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