Does corruption affect local and foreign-owned companies differently? Evidence from the BEEPS survey

Until recently, studies have not reached any general agreement on how a corrupt environment influences foreign investments. Furthermore, far too little attention has so far been paid to how corruption relates to the performance of foreign and domestically owned firms. This paper exploits cross-secti...

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Bibliographic Details
Published in:Post-communist economies 2020-04, Vol.32 (3), p.306-329
Main Authors: Ashyrov, Gaygysyz, Masso, Jaan
Format: Article
Language:English
Subjects:
Bribery
Bureaucracy
Companies
Corruption
Developing countries
FDI
firm performance
Foreign owned US companies
Informal economy
LDCs
Organizational performance
Payments
Polls & surveys
Productivity
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Summary:Until recently, studies have not reached any general agreement on how a corrupt environment influences foreign investments. Furthermore, far too little attention has so far been paid to how corruption relates to the performance of foreign and domestically owned firms. This paper exploits cross-sectional firm-level data from the fifth round of the Business Environment and Enterprise Performance Survey (BEEPS V) for the purpose of investigating how bribery is associated with FDI and firm performance. By using various econometric estimation strategies, we find that foreign owned firms tend to pay larger bribes compared to domestically owned firms, while the negative size of bribe expenses on firm productivity is larger for foreign owned firms than domestically owned firms in highly corrupt countries. This study suggests that developing countries should fight against informal payments in bureaucracy to create corruption free environments, so that multinationals are incentivized to invest in their countries.
ISSN:1463-1377
1465-3958
DOI:10.1080/14631377.2019.1640989