What Determines the Return to Bribery? Evidence From Corruption Cases Worldwide

Management Science, Forthcoming

76 Pages Posted: 20 Jul 2020

See all articles by Yan-Leung Cheung

Yan-Leung Cheung

The Education University of Hong Kong

P. Raghavendra Rau

University of Cambridge

Aris Stouraitis

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences

Date Written: June 27, 2020

Abstract

We analyze a hand-collected sample of bribery cases from around the world to describe how the payment of bribes affects shareholder value. The net present value of a bribe conditional on getting caught is close to zero for the median firm in our sample. However, controlling for industry, country, and firm characteristics, a $1 increase in the size of the bribe is associated with an ex ante $6-9 increase in the value of the firm, suggesting a correlation between the size of bribes and the size of available benefits. Proxies for information disclosure appear significant in explaining these benefits, with more disclosure associated with lower benefits. However, this result is driven by democratic countries where bribe-paying firms receive smaller benefits relative to the bribes they pay. Information disclosure is not significant in autocratic countries.

Keywords: Corruption, bribes, firm performance, country characteristics

JEL Classification: G14, G34, F23, K42, M14

Suggested Citation

Cheung, Yan-Leung and Rau, P. Raghavendra and Stouraitis, Aristotelis, What Determines the Return to Bribery? Evidence From Corruption Cases Worldwide (June 27, 2020). Management Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3636647

Yan-Leung Cheung

The Education University of Hong Kong ( email )

Department of Social Sciences
10 Lo Ping Road, Tai Po, New Territories
Hong Kong
Hong Kong

P. Raghavendra Rau (Contact Author)

University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)

HOME PAGE: http://www.raghurau.com/

Aristotelis Stouraitis

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences ( email )

Hong Kong

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