Study investigates perceptions surrounding corruption

Study investigates perceptions surrounding corruption

Corruption occurs in the business world, but how do people feel about it? That's the basis of research conducted by College of Business professor Dr. Max Stallkamp and the subject of an article, "Does it matter where you bribe? MNE bribery, social norms and legitimacy."

"It's a topic that's notoriously hard to study empirically, because companies don't like talking about their corrupt activities," he said. "I realized that I could build a dataset of companies that have been prosecuted under the Foreign Corrupt Practices Act (FCPA) and link that to social media data in order to examine the public reaction to revelations of corruption."

In the study, Stallkamp examines social media reactions to corruption revelations by trying to answer two questions, the first of which is, 'Do people care?'

"My first set of findings confirms that, yes, people do care," said Stallkamp. "There is a significant increase in negative social media chatter about these firms and their corrupt activities. I traced this to social media accounts in the U.S., the bribe country and worldwide."

The second question Stallkamp hoped to answer was whether it matters where a bribe is given.

"There has been this assumption in the literature that paying bribes in countries that are perceived as highly corrupt is somehow more 'OK' than paying bribes in 'clean' countries. However, I have not been able to find a single empirical study corroborating this. I tested it with my data and found that this is indeed the case - when U.S. companies pay bribes in countries that are known to be highly corrupt, there is less of a social media reaction when they get caught."

Stallkamp said his research revealed two practical implications. The first is that paying bribes is a risky business. The FCPA and related laws in other countries impose financial penalties if a firm gets caught bribing. Second, and perhaps more important, is that a company is subject to negative publicity in its home market, the market where it paid a bribe and even in unrelated countries. Negative publicity can have a significant effect on the company's reputation and public perception.

Stallkamp feels that there are three main takeaways that his research discovered.

"If your company gets caught bribing, people will notice," he said. "Any reputational damage is not limited to the country where you bribed but will spill over into your home country and other countries. Finally, bribing in less corrupt countries leads to a stronger public backlash than bribing in what are perceived to be corrupt countries."

More Blogs