Abstract

http://ssrn.com/abstract=2229039
 


 



An Analysis of Firms' Self-Reported Anticorruption Efforts


Paul M. Healy


Harvard Business School; National Bureau of Economic Research (NBER)

George Serafeim


Harvard University - Harvard Business School

October 2013


Abstract:     
We use Transparency International’s ratings of self-reported anticorruption efforts for 480 corporations to analyze factors underlying the ratings. Our tests examine whether these forms of disclosure reflect firms’ real efforts to combat corruption or are cheap talk. We find that firms with high ratings are domiciled in countries with low corruption ratings and strong anticorruption enforcement, operate in high corruption risk industries, have recently faced a corruption enforcement action, employ a Big Four audit firm, and have a higher percentage of independent directors. Controlling for these effects and other determinants, we find that firms with lower residual ratings have relatively higher subsequent media allegations of corruption. They also report higher future sales growth and show a negative relation between profitability change and sales growth in high corruption geographic segments. The net effect on valuation from sales growth and changes in profitability is close to zero. Given this evidence, we conclude that, on average, firms’ self-reported anticorruption efforts signal real efforts to combat corruption and are not merely cheap talk.

Number of Pages in PDF File: 55

Keywords: corruption, bribery, corporate performance, sales growth, profitability, disclosure, enforcement, monitoring, leadership

JEL Classification: M14, M1, M2, M4

working papers series


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Date posted: March 6, 2013 ; Last revised: January 29, 2014

Suggested Citation

Healy, Paul M. and Serafeim, George, An Analysis of Firms' Self-Reported Anticorruption Efforts (October 2013). Available at SSRN: http://ssrn.com/abstract=2229039 or http://dx.doi.org/10.2139/ssrn.2229039

Contact Information

Paul M. Healy
Harvard Business School ( email )
Soldiers Field
Boston, MA 02163
United States
617-495-1283 (Phone)
617-496-7387 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
George Serafeim (Contact Author)
Harvard University - Harvard Business School ( email )
381 Morgan Hall
Boston, MA 02163
United States
HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=15705
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