Excerpt from entry in Harvard Law Blog by authors ofresearch paperwith the above title:
We find that firms that win contracts by paying bribes under-perform their peers for up to three years before and after winning the contract for which the bribe was paid. The major characteristic that distinguishes these firms from their peers is sales growth. Firms that bribe are fixated on sales growth, not on maximizing shareholder value. Firm performance, the rank of the politicians bribed, as well as bribe-paying and bribe-taking country characteristics affect the magnitude of the bribes and the benefits that firms derive from them. Shareholders in these firms benefit but the higher the rank of politicians that they bribe, the lower the benefit that they get. Ultimately, if you bribe a head of state for example, the shareholders get no benefit from winning the contract – the size of the bribe more than offsets the value of the contract to the firm.
Our results have numerous policy implications. We show that since the worst firms win contracts, society is worse off from these payments, not merely because poorly performing firms may also deliver poor results, but because these firms are less efficient in converting inputs into results.
The paper canbe downloadedfrom the Data Library, Global / Integrity Fraud and Ethics folder.
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