To bribe or not to bribe? Corruption uncertainty and corporate practices

0476390 - NHÚ 2019 CZ eng V - Research Report
Hanousek, Jan - Shamshur, Anastasiya - Trešl, Jiří
To bribe or not to bribe? Corruption uncertainty and corporate practices.
Prague: CERGE-EI, 2017. 54 s. CERGE-EI Working Paper Series, 597. ISSN 1211-3298
R&D Projects: GA ČR(CZ) GA16-20451S
Institutional support: RVO:67985998
Keywords : corporate investment * corruption * uncertainty
Subject RIV: AH - Economics
http://www.cerge-ei.cz/pdf/wp/Wp597.pdf

Using a large sample of private firms over the period from 2001 to 2013, we study the effect of corruption uncertainty on corporate investments and cash holdings. We find that a higher uncertainty about the level of corruption is associated with lower corporate investments and lower cash holdings. These results are sensitive to the ownership structure of a firm. Firms with no foreign majority ownership appear to be more sensitive to corruption-induced uncertainty than majority-controlled foreign firms. They significantly decrease their investments and cash holdings. We hypothesize that they move their cash off-balance-sheet to create cash reserves as the uncertainty of when, whom, and how much to bribe increases.
Permanent Link: http://hdl.handle.net/11104/0272900