Bribes and Corporate Performance: Evidence from a Quasi-Natural Experiment

Bribes and Corporate Performance: Evidence from a Quasi-Natural Experiment

Woojin Kim, Jieun Im

Series number :

Serial Number: 
699/2020

Date posted :

September 11 2020

Last revised :

September 10 2020
SSRN Share

Keywords

  • bribes • 
  • anti-graft law • 
  • Firm performance • 
  • regulation • 
  • entertainment expense

We examine how bribes may affect corporate performance using a quasi-natural experiment. Specifically, we exploit the 2016 enactment of the Improper Solicitation and Graft Act in Korea which limits provision of gifts and entertainment to public sector employees as an exogenous shock to bribery practices.

We find that a firm’s level of bribery activities, instrumented by industry-level government exposure, has a negative impact on its performance. In particular, a reduction in predicted bribery activity results in a significant improvement in operating performance. Overall, our findings provide convincing evidence that bribery may impair corporate performance.

Authors

Real name:
Jieun Im