From the Top Down: Does Corruption Affect Performance?

Paper: arXiv 2310.20028

Authors: Maurizio La Rocca, Tiziana La Rocca, Francesco Fasano, Javier Sanchez-Vidal

Abstract

Corruption, fraud, and unethical activities have emerged as significant obstacles to global economic, political, and social progress. Although many empirical studies have focused on country-level corruption metrics, this study is the first to utilize a substantial international dataset to assess the effects of illicit and unethical managerial practices on firm performance. Employing cross-sectional data, this research examines the influence of corruption on corporate outcomes. Our definition of corruption evaluates the degree to which managers engage in mismanagement, misconduct, or corrupt activities. The repercussions for corporate governance, especially concerning the process of appointing managers, are both crucial and strategic.

Complexity vs Empirical Score

• Math Complexity: 2.0/10
• Empirical Rigor: 5.5/10
• Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper investigates the impact of firm-level managerial corruption on corporate performance using cross-sectional international data. While empirical analysis is applied to evaluate corporate outcomes, the mathematical framework remains basic, leaning heavily on traditional econometrics rather than complex mathematical formulations.

Research Flowchart

  flowchart TD
    A[Research Goal: Assess impact of managerial corruption on firm performance] --> B[Data Input: International cross-sectional dataset on equities]
    B --> C[Methodology: Define and quantify managerial misconduct and mismanagement]
    C --> D[Empirical Analysis: Cross-sectional econometric modeling]
    D --> E[Key Outcome: Top-down corruption significantly negatively impacts firm performance]
    E --> F[Strategic Implications: Need for enhanced corporate governance & manager selection]