Using a nationwide survey of provincial institutional quality and a sample of private manufacturing small and medium scale enterprises, this paper contributes to the literature by considering for the first time the effects of corruption on the financial performance of Vietnamese private SMEs. Interestingly, contrary to previous findings, we find that corruption when measured by a dummy variable, does not affect firms’ financial performance after controlling for heterogeneity, simultaneity and dynamic endogeneity. However, the intensity of bribery and the majority of (...) the forms of corruption were found to have negative impacts on firms’ financial performance. Hence, a typical approach using only a dummy variable for bribery might not adequately evaluate the impact of bribe intensity or even ignores the negative impacts of some types of bribes on firms’ financial performance. The findings suggest that anti-corruption measures are vital for the development of the Vietnamese private SMEs. (shrink)

This paper provides analyses of the effect of corruption in South Asia on credit access for small- and medium-size enterprises, and credit constraints faced by female-owned and male-owned SMEs. By addressing potential endogeneity and reverse causality of corruption and credit constraints via instrumental variables, this study reports that corruption has a detrimental effect on credit access. Specifically, corruption increases the probability of SMEs credit constraints by 7.63%. However, gender differences emerge, indicating that bribery is slightly more effective when used by (...) female SME owners. When male-owned SMEs pay bribes, they are on average 0.61% more credit-constrained than their counterparts. For female-owned SMEs paying bribes, they are on average 0.78% more likely to be less credit-constrained compared to female SME owners who do not pay bribes. Overall, bribery is not very effective in achieving the desired outcome and attitudes towards bribery as unethical may be more a question of culture than of gender. (shrink)

Recent research suggests that collectivism breeds corruption in bank lending. This finding, together with the stickiness of culture, poses a direct challenge to economic growth in collectivist societies. In this paper, we address this grim outlook by examining the types of firms that are susceptible to the detrimental effect of collectivism on lending integrity and the formal institutions that can help alleviate such effect. We find that the adverse effect of collectivism on bank corruption is more severe in small and (...) medium-sized firms, privately owned firms, and non-exporting firms, while it is considerably weaker in countries with more effective private monitoring, a higher fraction of foreign-owned banks, a more competitive banking sector, better information sharing, and stronger legal and political institutions. Our findings are robust to using alternative measures of collectivism and alternative dependent variables. These results highlight how firm-level characteristics and formal institutions interact with collectivism in affecting firms’ access to bank credit. (shrink)

Political corruption imposes substantial costs on shareholders in the U.S. Yet, we understand little about the basic factors that exacerbate or mitigate the value consequences of political corruption. Using federal corruption convictions data, we find that firm-level economic rents and monitoring mechanisms moderate the negative relation between corruption and firm value. The value consequences of political corruption are exacerbated for firms operating in low-rent product markets and mitigated for firms subject to external monitoring by state governments or monitoring induced by (...) disclosure transparency. Our results should inform managers and policymakers of the tradeoffs imposed on firms operating in politically corrupt districts. (shrink)

Tax compliance is an important issue for governments and the public alike. To meet public needs and fund public mandates, firms around the world are expected to comply with tax laws. Factors that are related to organizational (firm) tax compliance have not been sufficiently examined in the literature. Owing to the increasing global influence of transition economies, factors associated with firm tax compliance in transition economies are particularly of interest. Based on a sample of over 5,000 firms from 22 former (...) Soviet Bloc transition economies, we find that higher levels of corruption and higher levels of particularized trust (reliance on friends and family) are associated with lower levels of tax compliance. Interestingly, we also find that the negative relationship between corruption and tax compliance is weakened in situations of higher generalized trust (trust in strangers). Overall, our study’s results suggest that institutional factors play an important role and are related to firm tax compliance behavior in transition economies. (shrink)