Disclosure Standards, Auditing Infrastructure, and Bribery Mitigation
41 Pages Posted: 10 May 2011 Last revised: 1 May 2013
Date Written: May 1, 2013
Using a sample of 15,174 firms from 24 countries included in the 2009 World Bank Enterprise Survey, we investigate the impact of disclosure standards and auditing infrastructure on firm-level corruption. We find that firms are less likely to grant gift to secure a government contract in countries having more extensive financial reporting requirements and countries where audit firms face a higher litigation and sanction risk. Findings also show that firms are less likely to bribe bureaucrats in case financial statements are reviewed by an external audit firm. Our results are economically significant and are robust to several sensitivity analyses. These findings support certain policies that currently being implemented or discussed to mitigate corruption.
Keywords: auditing infrastructure; corruption; disclosure standards; litigation risk
JEL Classification: M41, G30, G38
Suggested Citation: Suggested Citation