Corruption perception, institutional quality and performance of listed companies in Nigeria

Abstract

We examine the effect of corruption perception and institutional quality on the performance of firms based on the extracted data for 135 listed companies in Nigeria with timeframe 2013–2017. We first use the Transparency International Corruption Perception Index for the baseline analysis, which evaluates the public officials and politicians’ corruption practices. To capture institutional quality, which depicts the level of law enforcement to curb corruptive practices of the public officials, we use the first component via Principle Component Analysis of six governance indicators extracted from World Bank Governance Indicators. We then use the Generalized Method of Moment (GMM) for the analysis. We find that corruption is negatively related to the market value (TobinQ) and accounting value performance (ROA). Similarly, institutional quality is negatively related to TobinQ and ROA. The results suggest that corruption and institutional quality weaken the market and accounting performance firms in Nigeria. We further compare the extent of corruption and institutional quality on performance between financial and non-financial institution. We find that both corruption and weak institutional environment tend to impair the market and accounting-based performance of non-financial firms, which could be traced to the less regulatory body in such institution compared to the financial institution. We suggest that Nigeria needs more effective and strong mechanisms proactive to curb corruption practices and weak institutional quality.

Do Institutions Promote Firm Performance? Evidence from Sub-Saharan Africa

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“…Quality regulatory framework could also remove some of the hurdles in the process of business operation, including multiple tax, long periods of time taken to obtain licence, etc., which usually cripple businesses in developing countries. This has confirmed the findings of Lv et al (2020) but disagree with the findings of Aralica et al (2018) and Ojeka et al (2019). Likewise, we find that when rule of law is established in SSA countries, the firm’s performance improves significantly, and this is plausible as agents have greater confidence and belief in the strength of legal institution to pass and enforce fair and impartial judgements, especially on property rights, business contract franchises, etc.…”

“…Amin and Ulku (2019) find that there is a significant negative nexus between corruption and the firm’s productivity when regulation is high and an insignificant relationship when it is low. Aralica et al, (2018) and Ojeka et al (2019) support the findings that control of corruption improves the firm’s performance in Central and Southeastern Europe and Nigeria, respectively. In contrast, Ashyrov and Akuffo (2020) find that corruption and bribery promote the firm’s productivity.…”

Corruption, Terrorism and the Stock Market: The Evidence from Iraq

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