Threat of Falling High Status and Corporate Bribery: Evidence from the Revealed Accounting Records of Two South Korean Presidents

Abstract

Social status and its dynamics may be an important predictor of which firms will engage in large-scale bribery. Prior theory is incomplete, however, and prior studies have lacked comprehensive and reliable data on firm-level bribery decisions. We offer a new theoretical prediction and a novel data set on high-level corruption in South Korea, where the accounting records of two presidents in the 1987-1992 era were exposed to after-the-fact legal and public scrutiny. We find that, controlling for a range of alternative explanations, the threat of falling high status—that is, the combination of longstanding high social status with current-period mediocre economic performance relative to that of industry peers—is a statistically and economically meaningful predictor of increases in the amount of large-scale corporate bribery.

Keywords: Status; Bribery; Corruption; Political network; Nonmarket strategy

JEL Classification: M1, M10, M14, M16, K42