Economic uncertainty and corruption: Evidence from public and private firms

Mansoor Afzali, Gonul Colak*, Mengchuan Fu

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We study the influence of policy uncertainty on the moral behavior of firms. When facing uncertainty, managers perceive various socioeconomic obstacles as more severe and disruptive to their business. Using data from policy uncertainty spouts in 93 countries, we document that some firms engage in norm-deviant behavior by cheating on taxes and paying more bribes. While private firms prefer to cheat on taxes, public firms choose bribery as a favorite tool to “grease the wheels” during periods of uncertainty. Strong social capital (local trust and religiosity) breaks this link between uncertainty and corruption.
Original languageEnglish
Article number100936
Peer-reviewed scientific journalJournal of financial stability
Volume57
ISSN1572-3089
DOIs
Publication statusPublished - 01.12.2021
MoE publication typeA1 Journal article - refereed

Keywords

  • 517 Political science
  • economic policy uncertainty;
  • private firms
  • 511 Economics
  • corruption;
  • trust

Sustainable Development Goals

  • GOAL 16: Peace and Justice Strong Institutions

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoS: Financial management, accounting, and governance

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