Bribes and Corporate Performance: Evidence from a Quasi-Natural Experiment

38 Pages Posted: 10 Sep 2020

See all articles by Jieun Im

Jieun Im

Seoul National University - Business School

Woojin Kim

Seoul National University - Business School; European Corporate Governance Institute (ECGI)

Date Written: September 8, 2020

Abstract

We examine how bribes may affect corporate performance using a quasi-natural experiment. Specifically, we exploit the 2016 enactment of the Improper Solicitation and Graft Act in Korea which limits provision of gifts and entertainment to public sector employees as an exogenous shock to bribery practices. We find that a firm’s level of bribery activities, instrumented by industry-level government exposure, has a negative impact on its performance. In particular, a reduction in predicted bribery activity results in a significant improvement in operating performance. Overall, our findings provide convincing evidence that bribery may impair corporate performance.

Keywords: bribes, anti-graft law, firm performance, regulation, entertainment expense

JEL Classification: D73, G32, G38

Suggested Citation

Im, Jieun and Kim, Woojin, Bribes and Corporate Performance: Evidence from a Quasi-Natural Experiment (September 8, 2020). European Corporate Governance Institute – Finance Working Paper No. 699/2020, Available at SSRN: https://ssrn.com/abstract=3688874 or http://dx.doi.org/10.2139/ssrn.3688874

Jieun Im

Seoul National University - Business School ( email )

1 Gwanak-ro, Gwanak-gu
Seoul, 08826
Korea, Republic of (South Korea)

Woojin Kim (Contact Author)

Seoul National University - Business School ( email )

1 Gwanak-ro, Gwanak-gu
Seoul, 08826
Korea, Republic of (South Korea)
82-2-880-5831 (Phone)

HOME PAGE: http://cba.snu.ac.kr/en/faculty?mode=view&memberidx=60582&major=6

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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