effect of corruption of business performance

Introduction

Corruption is a pervasive issue that affects business performance across various sectors and regions. The impact of corruption on firms can be complex, with some studies suggesting it can either hinder or, in certain contexts, facilitate business operations. This synthesis aims to consolidate findings from multiple research papers to provide a clear understanding of how corruption influences business performance.

Key Insights

Negative Impact on Financial Performance:
- Corruption generally harms firm financial performance, increasing the likelihood of business failure and reducing market and accounting value performance .
- Corruption is associated with lower performance in financial institutions, with larger banks underestimating credit risk and smaller banks increasing risky loans to recapture returns.
Context-Dependent Effects:
- In some regions, corruption can "grease the wheels" of business by helping firms navigate bureaucratic obstacles, particularly in environments with severe institutional barriers .
- However, this positive effect is not universal. For example, corruption "sands the wheels" in Latin America, the Caribbean, Eastern Europe, Central Asia, and Southern Asia, while it may "grease the wheels" in Africa.
Firm Characteristics and Corruption:
- Larger and exporting firms are better at mitigating the negative impacts of corruption and may even benefit from it in certain contexts .
- Newly established and private domestic firms are more adversely affected by corruption compared to state-owned or foreign firms.
Sector-Specific Impacts:
- Non-financial firms in environments with weak institutional quality suffer more from corruption compared to financial firms, likely due to less regulatory oversight.
- Anti-corruption measures improve the performance of state-owned enterprises but can reduce the performance of non-state-owned enterprises, indicating a complex relationship between corruption and firm type.
Perception and Adaptation:
- Firms that do not face significant competition, are larger, or are younger tend to perceive corruption more favorably, suggesting that these firms might adapt better to corrupt environments.

Conclusion

Corruption generally has a detrimental effect on business performance, reducing financial outcomes and increasing the risk of failure. However, the impact of corruption can vary significantly depending on the regional context, firm characteristics, and sector. While some firms may find ways to navigate or even benefit from corrupt practices, the overall consensus is that corruption poses a significant obstacle to sustainable business performance. Effective anti-corruption measures and strong institutional frameworks are crucial for mitigating these negative impacts and fostering a healthier business environment.

Effect of corruption of business performance

Summary

Introduction

Key Insights

Conclusion

Sources and full results

Corruption, Types of Corruption and Firm Financial Performance: New Evidence from a Transitional Economy

Corruption, when measured as a dummy variable, does not affect Vietnamese private SMEs' financial performance, but bribe intensity and most forms of corruption negatively impact it.

Does corruption ever help entrepreneurship?

Corruption always negatively impacts entrepreneurship, with smaller but still negative impacts when business climates are already bad.

Does Corruption Boost or Harm Firms’ Performance in Developing and Emerging Economies? A Firm‐Level Study

Corruption harms firm performance in developing and emerging economies, with African firms experiencing better performance, while Latin American, Caribbean, Eastern Europe, Central Asia, and Southern Asia experience worse performance.

Corruption, innovation and firm growth: firm-level evidence from Egypt and Tunisia

Corruption negatively impacts innovation in firms, but positively impacts it when combined with institutional obstacles, helping firms overcome bureaucratic barriers and boost employment growth.

Corruption perception, institutional quality and performance of listed companies in Nigeria

Corruption and weak institutional quality negatively impact the market and accounting performance of Nigerian firms.

The impact of corruption on the performance of newly established enterprises: Empirical evidence from a transition economy

Corruption negatively impacts the financial performance and survival of newly established enterprises in Vietnam, with private domestic firms more affected than state-owned firms, and foreign firms able to take advantage of corruption for enhanced performance and survivability.

Economic analysis of corruption at the company level

Companies perceive corruption as an obstacle to business performance, with factors like government transparency and accountability playing a significant role in this perception.

The effect of state-level corruption on performance and risk of financial institutions

Corrupt environments negatively impact the performance and risk of financial institutions in the USA, with smaller banks being more risk averse and larger banks experiencing higher non-performing loans.

Effects of anti-corruption on firm performance: Evidence from a quasi-natural experiment in China

Anti-corruption campaigns in China improve firm performance for central state-owned enterprises but reduce it for non-state-owned enterprises, creating a double-edged sword for regulators.

Corruption and Firm Performance

Corruption is perceived as more favorable among firms with less competition, larger size, and younger age, suggesting that enforcement of antitrust policies and competition policies can help combat corruption.

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