Corruption, Regulatory Burden and Firm Productivity

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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

“…It is clear from the analysis that institutional variables are important in promoting the firm’s performance in SSA countries as they guarantee ease of doing business, friendly business environment and favourable investment climate. In specifics, the findings show that control of corruption has a positive and significant impact on firm’s performance in SSA, which support the findings of Achim (2017), Amin and Ulku (2019), Aralica et al (2018) and Raj and Sen (2017) that control of corruption helps reduce both direct and indirect costs on firms. This is because grand bribery and corruption create unnecessary bottlenecks in the process of beginning and operating business activity, which makes firms inefficient.…”

“…We estimated the individual effects of the institutions so as to avoid the problem of multicollinearity among the institutional variables as informed by strong correlation between them in Table 2. Model 1 in Table 3 shows that control of corruption is rather negatively significant in determining LP, which is contrarily to priori expectation and findings of previous (Aralica et al, 2018; Amin & Ulku 2019).…”

“…Albeit, sometimes, firms can give out bribe to government officials, in order to secure future benefits directly or indirectly from government projects and policies. 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.…”

Global Productivity: Trends, Drivers, and Policies

“…Especially when the burden of regulation is high, as it tends to be in LAC, corruption is detrimental for productivity (Amin and Ulku 2019). On measures of doing business, no country in LAC is among the top 50 performers in the world (World Bank 2020d).…”

Financial Access of Latin America and Caribbean Firms: What Are the Roles of Institutional, Financial, and Economic Development?

“…Loayza et al (2005) conclude that a heavy regulation imposed on the firms (goes in hand with worse governance) has a detrimental impact on economic growth. Amin and Ulku (2019) indicate that corruption and excessive regulation reinforce each other and affect firms' performance negatively. With regard to financial access, the World Bank (2014) finds that regulatory burden (measured by manager's time spent to deal with government regulation) significantly affects firms' access to bank loan.…”