Corruption and firm growth: Evidence from China

Abstract

Corruption is one of the most pervasive obstacles to economic and social development. However, in the existing literature it appears that corruption seems to be less harmful in some countries than in others. The most striking examples are well known as the "East Asian paradox": countries displaying exceptional growth records despite having thriving corruption cultures. The aim of this paper is to explain the high corruption but fast economic growth puzzle in China by providing …rm-level evidence of the relation between corruption and growth and investigating how …nancial development in ‡uences the former relationship. Our empirical results show that corruption is likely to contribute to …rms' growth. We further highlight the substitution relationship between corruption and …nancial development on …rm growth. This means that corruption appears not to be a vital constraint on …rm growth if …nancial markets are underdeveloped. However, pervasive corruption deters …rm growth where there are more developed …nancial markets. This implies that fast …rm growth will not be observed until a later stage of China's development when …nancial markets are well-functioning and corruption is under control. Furthermore, the substitution relationship exists in the private and state-owned …rms. Geographically, similar results can be seen in the Southeast and Central regions.

Corruption and Technological Innovation in Private Small-Medium Scale Companies: Does Female Top Management Play a Role?

“…The estimated coefficient clearly states that SMCs with corrupt behavior have a higher innovative motivation than those without. It is in line with the findings by Wang and You [41] on Chinese firms. The odds ratio results also tell us that in the case of the given variables the passion for innovation in companies involved in corruption is 64% higher than that of those without.…”

Corrupção e Crescimento: os impactos da corrupção ponderados pelos diferentes graus de eficiência entre as firmas

“…In this sense, the position of an efficient firm as the quantile frontier affects significantly the consequences of corruption, suggesting a heterogeneous effect that is not accurately captured by traditional techniques. These results corroborate scientific studies carried out by Batra, Kaufmann and Stone (2003), Wang and You (2012) and Jiang and Nie (2014).…”

Corruption and Stock Market Development: New Evidence from GCC Countries

“…Hillman and Krausz (2004) show that corruption brings short term performance advantages. For example, Wang and You (2012) suggest that corruption is likely to increase firm growth when financial markets are underdeveloped whereas it deters firm growth when there are more devel oped financial markets. On the same vein, Pinheiro (2010) suggests that, in more developed countries, corruption is inversely related to stock market returns while, in develop ing economies, higher levels of corruption impact positively on stock markets returns In contrast, Olken (2007) finds that corruption can seriously hamper the distributive efforts of developing countries.…”