Impact of Private Incidence of Corruption and Firm Ownership on Performance of Firms in Central and Eastern Europe

Katholieke Universiteit Leuven, LICOS Discussion Paper No. 310/2012

37 Pages Posted: 16 Jun 2012

See all articles by Sandra Blagojevic

Sandra Blagojevic

University of Ljubljana. Faculty of Economics

Jože P. Damijan

University of Ljubljana, Slovenia - Department of International Economics

Date Written: February 1, 2012

Abstract

The paper investigates how efficiency of business environment and corruption (informal payments and state capture) affect the microeconomic performance of firms. The novelty of the paper is to look at these effects in the interaction with the firm ownership. We use firm-level micro data collected by the Business Environment and Enterprise Performance Survey (BEEPS) for 27 transition countries for the period 2002-2009. Among other data, BEEPS collects also information on different corruption activities at the firm-level and firm ownership. We find somehow surprising results that private firms (domestic and foreign owned) are more involved both into informal payments as well as state capture activities. Our results also reveal that foreign owned firms that are involved in informal payments are likely to benefit from these corruption practices. On the other side, state owned firms are more likely to experience negative effects of involvements in corruption practices on productivity growth. After 2004, involvement of firms in corrupt practices diminished, and that their negative impact on firm performance dissipates indicating an improvement in the stability of business environment and law enforcement.

Keywords: corruption, informal payments, state capture, institutional stability, firm ownership, firm performance

JEL Classification: D04, D73, H10, K42, O17, P37

Suggested Citation

Blagojevic, Sandra and Damijan, Joze P., Impact of Private Incidence of Corruption and Firm Ownership on Performance of Firms in Central and Eastern Europe (February 1, 2012). Katholieke Universiteit Leuven, LICOS Discussion Paper No. 310/2012. Available at SSRN: https://ssrn.com/abstract=2084609 or http://dx.doi.org/10.2139/ssrn.2084609

Sandra Blagojevic (Contact Author)

University of Ljubljana. Faculty of Economics ( email )

Dunajska 104
Ljubljana, 1000
Slovenia

Joze P. Damijan

University of Ljubljana, Slovenia - Department of International Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia
+386 61 189 24 00 (Phone)
+386 61 189 26 98 (Fax)

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