Economic uncertainty and corruption: Evidence from public and private firms

Mansoor Afzali, Gönül Ҫolak and Mengchuan Fu

Journal of Financial Stability, 2021, vol. 57, issue C

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.

Keywords: Economic policy uncertainty; Private firms; Corruption; Bribery; Cheating on taxes; Trust; Religiosity (search for similar items in EconPapers)
JEL-codes: D80 F30 G38 O43 P48 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:57:y:2021:i:c:s1572308921000954

DOI: 10.1016/j.jfs.2021.100936

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