Denial of corruption: voluntary disclosure of bribery information

Abstract

This study explores the rationality behind firms’ decision to admit or deny their involvement in bribery when responding to confidential surveys conducted by international agencies (such as the World Bank). Specifically, we posit that firms’ reluc-tance to provide accurate information about their engagement in bribery is at least to some extent contingent on certain situ-ational factors. In other words, we claim that this behavior is context dependent. The paper uses the notions provided by the theory of planned behavior to understand the way in which the corruption of the legal environment, the intensity of market competition, and identification risk influence firms’ decision to lie about their involvement in bribery. To test these notions, we use databases from the fifth wave of the EBRD-World Bank Business Environment and Enterprise Performance Survey, country-level data from the Kauffman Foundation and macroeconomic (i.e., countrylevel) information from the World Bank database. We run ordinary least squares with geographic region-clustered standard errors on data from 30 countries and 6122 individual firms during the period 2012–2013. Consistent with our expectations, the results indicate that firms operating within more corrupt legal environments, facing more competition, and bearing a higher risk of being identified are less likely to deny their involvement in bribery. We conclude that not all firms have the same incentives to lie about their participation in bribery, and therefore, identifying the drivers of this heterogeneity may help policymakers better assess the reliability of bribery information collected through confidential surveys.