Does corruption boost or harm firms’ performance in developing and emerging economies? A firm‐level study

Bibliographic Data

ID21543370
AuthorsLurdes Martins (0000-0002-5296-4878, School of Economics and Management University of Minho Braga Portugal, corresponding author), Jorge Cerdeira (0000-0002-2539-0557, School of Economics and Management University of Minho Braga Portugal), Aurora A C Teixeira (0000-0002-3191-5217, CEF.UP Faculdade de Economia Universidade do Porto Porto Portugal)
Year2020
Volume43
Issue8
Pages2119-2152
Publication date2020-08-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueWorld Economy (JOURNAL)
Journal identifiersISSN: 0378-5920 • E-ISSN: 1467-9701
PublisherWiley (PUBLISHER • GB)
DOI10.1111/twec.12966
OpenAlexW3022562302
LanguageEN
Citations received15
References cited83

In the last decade, a growing number of studies have addressed the ongoing debate about whether corruption “sands” or “greases” the wheels of business at the firm level. This study revisits this debate and proposes a comprehensive theoretical framework to test whether corruption harms or boosts firm performance, as well as the extent to which this relationship is mediated by the countries’ institutional settings, the size and strategic behaviour of the firms, and market competition. Based on a sample of 21,250 firms located in 117 emerging and developing countries, and resorting to instrumental variable (IV) estimations, three main results were found: (a) regardless of the proxy used for corruption and firm performance, the former clearly harms the latter; (b) corruption “greases the wheels” of business for African firms but it “sands the wheels” for firms in Latin America, the Caribbean, Eastern Europe, Central Asia, and Southern Asia; and (c) the negative impact of corruption on performance is mitigated for larger and exporting firms

Business · Developing country · Development economics · Economic growth · Economics · Emerging markets · Harm · Instrumental variable · Language change · Latin Americans · Monetary economics · Political science · Corporate Finance and Governance · Corruption and Economic Development · Economic Growth and Development · Finance

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