Business strategies and corruption in small‐ and medium‐sized enterprises: The impact of business group affiliation, external auditing, and international standards certification

Abstract

We examine the impact of three business strategies separately and in combination on the tendency for firms to engage in corruption. Using a sample of 56,827 firm-year observations for small-and medium-sized enterprises (SMEs) over the 2006-2018 period, we find that firms with business group affiliations are more likely to engage in corrupt practices in countries with low business freedom. However, those in countries with high business freedom are less likely to do so. We also find that firms that engage the services of external auditors and adopt international standards are less likely to be corrupt, especially in countries with weak financial reporting standards. Our results also show that corruption intensity reduces even more for firms that employ the three strategies, whether we consider institutional factors or not. This result holds when we use a three-way interaction term. We conclude that the three strategies are mutually reinforcing and that firm-level and country-level efforts complement each other in mitigating corruption.

Corporate corruption, business strategy and sustainable environment

“…Overall, the results suggest that unexpected activities and disclosure in respect of shows that firms that engage external auditors and adopt international standards are less likely to be corrupt, especially in countries with weak financial reporting standards. Changwony and Kyiu (2022) also show that corruption intensity reduces even more for firms that employ the three strategies, whether considering institutional factors or not. (2022) deal with such topic by underlining which are the main features/attributes that distinguish an effective compliance model, we believe that more research must be done in this direction, mostly through empirical research.…”

“…The research also shows that firms that engage external auditors and adopt international standards are less likely to be corrupt, especially in countries with weak financial reporting standards. Changwony and Kyiu (2022) also show that corruption intensity reduces even more for firms that employ the three strategies, whether considering institutional factors or not.…”

“…Using a single-case study approach (Eni Group), the paper identifies the key traits to increase the effectiveness of a compliance programme in detecting and preventing illegal behaviours.Changwony and Kyiu (2022) examine the impact of three business strategies separately and in combination on the tendency for firms to engage in corruption. Using a sample of 56,827 firm-year observations for small-and medium-sized enterprises (SMEs) over the 2006-2018 period,Changwony and Kyiu (2022) find that firms with business group affiliations are more likely to engage in corrupt practices in countries with low business freedom, while in those with high business freedom are less likely to do so. The research also…”

“…Changwony and Kyiu (2022) examine the impact of three business strategies separately and in combination on the tendency for firms to engage in corruption. Using a sample of 56,827 firm‐year observations for small‐ and medium‐sized enterprises (SMEs) over the 2006–2018 period, Changwony and Kyiu (2022) find that firms with business group affiliations are more likely to engage in corrupt practices in countries with low business freedom, while in those with high business freedom are less likely to do so. The research also shows that firms that engage external auditors and adopt international standards are less likely to be corrupt, especially in countries with weak financial reporting standards.…”

“…All the research questions provided in the special issue proposal have been addressed by the contributors: Ruggiero and Mussari (2022) focus on the definitions, characteristics and issues of corporate corruption and Trequattrini et al (2022) analyse the contribution of blockchain‐based technologies to anticorruption practices; Changwony and Kyiu (2022) examine the implications of business strategies on the tendency for firms to engage in corruption; Cappelli et al (2022) explore the challenge of digital change and its contribution to transparency and anticorruption policies within Italian universities; Medioli et al (2022) analyse the influence of public governance environment on the strategical opportunistic use of related party transactions in family firms; and Cardoni et al (2022) investigate the value relevance of corporate governance and anticorruption policies from a sustainable value perspective, basing the analysis on institutional and stakeholder theories; Moscariello et al (2022), through a single case study, offer practical insights to understand what are the main attributes that distinguish an effective compliance programme from a formal/legal one.…”