The determinants and impact of business corruption : evidence from establishments in Eastern Europe and Central Asia

Abstract

As corruption gains public attention, there is an increased acknowledgement of its impact on business. Circumstances around a corrupt may act differ, but thesis seeks to understand some common factors. Corruption might be embedded in a country or occur sporadically. One of the many ways a business can participate in corrupt acts, willingly or reluctantly, is via bribery of public officials. This thesis seeks to examine corruption and bribery in relation to the government from the firm’s perspective, using firm-level data from Eastern Europe and Central Asia. We use the Business Environment and Enterprise Performance Survey to focus on the way corruption affects businesses and when they are more likely to encounter it. This thesis adds several aspects to current corruption research using BEEPS. Given a possibly changing corruption environment, this thesis uses numbers from both 2009 and 2013; it also separates bribery from corruption, and compares the two. . Surprisingly, firm characteristics, except firm size, do not affect the probability that a firm pays a bribe. However, firms are more likely to bribe when faced with increasingly challenging financial constraints due to corruption, access to finance, land access, courts and tax administration, business licensing, practices of informal competitors.