Benefits of bribery: New study separates fact from fiction

The study, titled “What determines the return to bribery? Evidence from corruption cases worldwide,” did not find a link between the size of a bribe and the size of the intended benefit, or that bigger companies are forced to give out bigger bags of cash to corrupt officials. Nor did it find that tougher anti-corruption regimes necessarily reduce the size of the benefits firms receive.

The academic paper—co-authored by Yan-Leung Cheung of Education University of Hong Kong, Raghavendra Rau of Cambridge Judge Business School, and Aris Stouraitis of Hong Kong Baptist University—examined 195 prominent reported bribery cases over four decades between 1975-2015. Between them, the companies that were reviewed had reportedly bribed officials in 60 countries.

The research found that:

• Bribery pays dividends (until companies are caught, that is). The research suggests a direct correlation between the size of bribes and the size of available benefits: For example, $1 in bribes correlates to about a $6-9 increase in the value of companies that pay bribes.
• There is no evidence to support any assumption that the size of a bribe is linked to the size of the benefit. However, companies pay larger bribes when they expect to receive larger benefits.
• There is little evidence to support the argument that explicit anti-bribery enforcement reduces the size of the benefits companies receive.
• The net benefits of bribery are smaller in countries that have mandated more public disclosure of politicians’ sources of income.
• There is qualified support for the hypothesis that bribery can lower transaction costs by enabling transactions that have been blocked by inefficient bureaucracies.
• There is some support to the idea that benefits to bribes increase in more corrupt countries.
• There is no evidence to suggest that government officials capture a larger share of rents from complex projects when companies pay bribes.
• More profitable companies are not forced to pay larger bribes for a given benefit.
• Politicians with greater power to block transactions (for example, because they face less interference from other officials) do not receive a larger share of bribes.

Explaining the report’s findings, co-author Rau, professor of finance at Cambridge Judge Business School, said: “The fact that we found strong support for only a few of the large number of hypotheses about bribery shows how little we all really know about the benefits of bribery at the micro level.”