Corruption, Types of Corruption and Firm Financial Performance: New Evidence from a Transitional Economy

Abstract

Using a nationwide survey of provincial institutional quality and a sample of private manufacturing small and medium scale enterprises (the SMEs), this paper contributes to the literature by considering for the first time the effects of corruption on the financial performance of Vietnamese private SMEs. Interestingly, contrary to previous findings, we find that corruption when measured by a dummy variable, does not affect firms’ financial performance after controlling for heterogeneity, simultaneity and dynamic endogeneity. However, the intensity of bribery and the majority of the forms of corruption were found to have negative impacts on firms’ financial performance. Hence, a typical approach using only a dummy variable for bribery might not adequately evaluate the impact of bribe intensity or even ignores the negative impacts of some types of bribes on firms’ financial performance. The findings suggest that anti-corruption measures are vital for the development of the Vietnamese private SMEs.

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Notes

  1. 1.

    Time tax reflects the required time that the managers of firms spend complying with government regulations (De Rosa et al. 2010).

  2. 2.

    The World Business Environment Survey interviewed managers from more than 9000 firms in 1999–2000. Respondents were asked: “is it common for firms in your line of business to have to pay some irregular “additional payments” to get things done?”.

  3. 3.

    The definitions of these sub-indicators are presented in Appendix Table 5.

  4. 4.

    After replacing bribe by bribe intensity or types of corruption, negative and significant relationships between bribe intensity or types of corruption with firms’ financial performance are also observed.

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Acknowledgments

The authors thank editors and referees for their helpful comments and the research is funded by Vietnam National University, Hanoi (VNU) under project number QG.15.40.

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Correspondence to Huong Van Vu or Tuyen Quang Tran.

Appendices

Appendices

Tables 5 and 6.

Table 5 Definition and measurement of variables included in the models
Table 6 Dynamic models controlled for institutional quality at provincial level

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Van Vu, H., Tran, T.Q., Van Nguyen, T. et al. Corruption, Types of Corruption and Firm Financial Performance: New Evidence from a Transitional Economy. J Bus Ethics 148, 847–858 (2018). https://doi.org/10.1007/s10551-016-3016-y

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Keywords

  • Corruption
  • Financial performance
  • SMEs
  • Institutional quality
  • Vietnam