"Which firms benefit from bribes, and how much? Evidence from worldwide corruption cases"

Despite a huge academic literature on corruption, there is little direct evidence on the types of firms that pay bribes, and on the factors that influence the magnitude of these bribes and the benefits that firms derive from them. This is not surprising since this kind of activity is usually undisclosed. Most of the empirical literature has attempted to measure bribery indirectly, by relying on questionnaires and survey evidence or by conducting small-scale field experiments. Moreover, the current literature seldom examines firm-level data, and when such evidence is examined it is also derived from surveys. However, recent research highlights a very long list potential problems and biases with this survey evidence on corruption.

In response to this problem, we plan to analyze a hand-collected sample of prominent bribery cases, involving publicly listed firms from different stock markets that have committed bribery of government officials worldwide, with particular emphasis on Asia. We expect that more than half of the sample will involve firms or government officials from Asia (mostly China, Japan, Korea, and to a lesser extent Taiwan, Singapore, Hong Kong, and the Philippines). We will focus on the initial date of award of the contract for which the bribe was paid (rather than on the revelation of the bribery). We plan to measure the benefits that firms receive from paying bribes as the increase in firm market value around the dates of the award of the contract for which the bribe was paid net of the bribe payment. In addition, we will compare the bribing firms with a matched sample of competitors that have not been involved in bribery incidents.

Our data will enable us to describe in detail the mechanisms through which bribes affect firm value. We aim to answer three questions. Do firms that win government contracts by paying bribes differ in their performance characteristics from firms that do not pay bribes? Which firm performance, government official, bribe-paying country and bribe- taking country characteristics affect the magnitude of the bribes that firms pay? What benefits do firms receive by paying bribes and which of the above factors affect these benefits?

Our study will differ from the majority of the academic literature on bribery, which uses data derived from surveys. To the extent that our results differ from previous survey- based studies, our findings may support moves away from surveys and towards the analysis of real world corruption cases.