Corporate profitability and the global persistence of corruption

0525513 - NHU-C 2021 CZ eng V - Research Report
Ferris, S. P. - Hanousek, Jan - Trešl, Jiří
Corporate profitability and the global persistence of corruption.
Prague: CERGE-EI, 2020. 44 s. CERGE-EI Working Paper Series, 659. ISSN 1211-3298
R&D Projects: GA ČR GA18-18509S
Institutional support: Progres-Q24
Keywords : corruption * inefficiency * performance
OECD category: Applied Economics, Econometrics
https://www.cerge-ei.cz/pdf/wp/Wp659.pdf

We examine the persistence of corporate corruption for a sample of privately-held firms from 12 Central and Eastern European countries over the period 2001 to 2015. Creating a proxy for corporate corruption based on a firm’s internal inefficiency, we find that corruption enhances a firm’s profitability. A channel analysis further reveals that inflating staff costs is the most common approach by which firms divert funds to finance corruption. We conclude that corruption persists because of its ability to improve a firm’s return on assets, which we refer to as the Corporate Advantage Hypothesis.
Permanent Link: http://hdl.handle.net/11104/0309628