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An Analysis of Firms' Self-Reported Anticorruption Efforts

The Accounting Review Vol. 91, No. 2, pp. 489-511, 2016

55 Pages Posted: 6 Mar 2013 Last revised: 1 Feb 2017

Paul M. Healy

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

George Serafeim

Harvard University - Harvard Business School

Date Written: March 1, 2016

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.

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

JEL Classification: M14, M1, M2, M4

Suggested Citation

Healy, Paul M. and Serafeim, George, An Analysis of Firms' Self-Reported Anticorruption Efforts (March 1, 2016). The Accounting Review Vol. 91, No. 2, pp. 489-511, 2016. Available at SSRN: https://ssrn.com/abstract=2229039 or http://dx.doi.org/10.2139/ssrn.2229039

Paul M. Healy

National Bureau of Economic Research (NBER)

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Harvard Business School ( email )

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George Serafeim (Contact Author)

Harvard University - Harvard Business School ( email )

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Boston, MA 02163
United States

HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=15705

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