What Determines the Return to Bribery? Evidence from Corruption Cases Worldwide

We analyze a hand-collected sample of bribery cases from around the world to describe how the payment of bribes affects shareholder value. The net present value of a bribe conditional on getting caught is close to zero for the median firm in our sample. However, controlling for industry, country, an...

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Bibliographic Details
Published in:Management science 2021-10, Vol.67 (10), p.6235-6265
Main Authors: Cheung, Yan-Leung, Rau, P. Raghavendra, Stouraitis, Aris
Format: Article
Language:English
Subjects:
Autocracy
Bribery
bribes
Corruption
country characteristics
Disclosure
firm performance
Payment systems
Present value
Valuation
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Summary:We analyze a hand-collected sample of bribery cases from around the world to describe how the payment of bribes affects shareholder value. The net present value of a bribe conditional on getting caught is close to zero for the median firm in our sample. However, controlling for industry, country, and firm characteristics, a $1 increase in the size of the bribe is associated with an ex ante $6–$9 increase in the value of the firm, suggesting a correlation between the size of bribes and the size of available benefits. Proxies for information disclosure appear significant in explaining these benefits with more disclosure associated with lower benefits. However, this result is driven by democratic countries where bribe-paying firms receive smaller benefits relative to the bribes they pay. Information disclosure is not significant in autocratic countries. This paper was accepted by Gustavo Manso, finance.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.2020.3763