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The Impact of Bribery on Firm Performance: Evidence from Central and Eastern European Countries

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  • Anna Kochanova

Abstract

I examine the relation between bureaucratic corruption ('to get things done') and firm performance in Central and Eastern European countries. While previous re- search relies on data from the BEEPS survey, which suffers from excessive non- reporting of corporate performance, I combine the information on bribery practices from the BEEPS with reliable firm performance data from the Amadeus database. The estimates, identified from within-firm variation, suggest that bureaucratic cor- ruption negatively affects both the sales and labor productivity growth of firms. However, conditional on a given level of bribery in a narrowly defined local market, a higher dispersion of firms' bribing behavior within such a market appears to facili- tate firm performance. I provide an explanation for this finding and also investigate the effect of bribery with respect to the heterogeneity of firms in terms of their size, inclusion in the manufacturing or service sector, stability, and countries' overall in- stitutional environments.

Suggested Citation

  • Anna Kochanova, 2012. "The Impact of Bribery on Firm Performance: Evidence from Central and Eastern European Countries," CERGE-EI Working Papers wp473, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  • Handle: RePEc:cer:papers:wp473
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Martin Pospisil & Jiri Schwarz, 2014. "Bankruptcy, Investment, and Financial Constraints: Evidence from a Post-Transition Economy," Working Papers IES 2014/12, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2014.
    2. Fungáčová, Zuzana & Kochanova, Anna & Weill, Laurent, 2015. "Does Money Buy Credit? Firm-Level Evidence on Bribery and Bank Debt," World Development, Elsevier, vol. 68(C), pages 308-322.
    3. World Bank, 2013. "Taking Stock, December 2013," World Bank Other Operational Studies 16731, The World Bank.
    4. Vida Patrik, 2016. "The Potential of Biotechnology Investments in Selected Eastern European Countries: Lost Chances," Business Systems Research, De Gruyter Open, vol. 7(1), pages 16-34, March.

    More about this item

    Keywords

    bureaucratic corruption; firms' bribing behavior; firm performance; CEE countries;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • P37 - Economic Systems - - Socialist Institutions and Their Transitions - - - Legal

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