DP10951 Is bread gained by deceit sweet to a man? Corruption and firm efficiency

Author(s): Jan Hanousek, Anastasiya Shamshur, Jiri Tresl
Publication Date: November 2015
Keyword(s): CEO, corruption, efficiency, Europe, ownership structure, panel data, stochastic frontier
JEL(s): C33, D24, G32, L60, L80, M21
Programme Areas: Financial Economics, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10951

We study the effects of corruption on firm efficiency using a unique comprehensive dataset of private firms from 14 Central and Eastern European countries for the period from 2000 to 2013. We find that an environment characterized by a high level of corruption has an adverse effect on firm efficiency. This effect is amplified for firms with a lower propensity to behave corruptly, i.e. foreign-controlled firms and firms managed by female CEOs, while domestically-owned firms and firms with male CEOs are not penalized. At the same time, an environment characterized by considerable heterogeneity in perception of corruption is associated with an increase in firm efficiency. This effect is particularly strong for foreign firms from low-corruption countries, while no effect is observed for firms managed by female CEO.