Do Better Managers Engage in Less Corruption?

• In Event: Bureaucratic Recruitment and Incentives

Abstract

Work on the relationship between regulation and bribery generally treats businesses as victims
of malfeasance by politicians or bureaucrats. We challenge this consensus through a formal
model showing that poorly managed firms may initiate bribes to gatekeepers either as part of
a strategy to avoid regulatory compliance or because lax internal controls allow employees to
independently bribe for personal gain. We test these hypotheses with two linked investigations.
First, we use survey data from close to 200,000 firms in 154 economies to demonstrate that a global negative relationship exists between bribe payments and both productivity and management
quality. Second, we explore the causality of this relationship by randomly assigning firms to
management and internal controls training courses in Vietnam, exploring how the training impacts
both downstream productivity and bribery with detailed accounting workbooks. We find dramatic
reductions in both the scale and scope of corruption. Firms in the management and internal
controls training paid one-third smaller bribe amounts ($307) than the placebo group in the
month before the endline survey.

Author

• Edmund J. Malesky, Duke University