THE EFFECT OF CORRUPTION ON FIRM GROWTH: EVIDENCE FROM FIRMS IN TURKEY

Journal Title: Asian Economic and Financial Review - Year 2014, Vol 4, Issue 5

Abstract

To our knowledge, there is no micro-level study paying attention to the influence of corruption on firm growth. We aim to fill this gap in the literature. This paper therefore contributes to the limited literature on the link between corruption and firm growth in a single country, Turkey. To estimate the relationship between firm growth and corruption, we analyze a sample of 41 firms from manufacturing firms in Turkey, covering the period from 2008 to 2011 by using static panel techniques. The study find evidence that the effect of corruption level, profitability and financial leverage on the growth of the firms is significantly positive in all case, but financial risk rating is negative. We find specifically a significantly positive relation between the growth of private firms and corruption level. This leads that corruption could increase economic development, mainly because illegal practices and payments as ?speed money? could surpass bureaucratic delays; the acceptance of bribes in government employees could work as an incentive and increase their efficiency and because corruption is possibly the price people are forced to pay as a result of market failures. The results of this study provide managerial implications for industrial companies from Turkey: Company managers should increase profitability, should reach economies of scale, an optimal capital structure level and reach the optimal level of working capital level due to profitable firms grow faster than other companies. We also suggest that policy-makers improve in public governance quality and the leveling of the playing field for firms in all business sectors to reduce corruption level because firms tend to pay bribes and the time that is wasted on bureaucratic procedures and engage in corrupt practices in an attempt to promote their short-term growth by facilitating transactions in the bureaucratic process.

Authors and Affiliations

Hasan Ayaydın| Department of Business Administration, Gumushane University, Gumushane, Turkey, Pınar Hayaloglu| Department of Economics, Gumushane University, Gumushane, Turkey

Keywords

Related Articles

CORRUPTION AND POLITICAL VIEW POINT OF THE GOVERNMENTS IN TRANSITION COUNTRIES EU MEMBERS

In achieving their goals in conducting measures of their economic policy, governments of transition countries EU members, should realize the importance of suppressing the phenomenon of corruption in economy, especially i...

DYNAMICS OF THE RELATIONSHIP BETWEEN IMPLIED VOLATILITY INDICES AND STOCK PRICES INDICES: THE CASE OF EUROPEAN STOCK MARKETS

This paper examines the relationship between implied volatility indices and stock price indices in the case of five European market : Euro zone, France, Germany, Switzerland and the United Kingdom for the period from Jan...

DETERMINANT OF FDI: EVIDENCE FROM ORGANIZATION OF THE PETROLEUM EXPORTING COUNTRIES (OPEC)

The paper examined the determinants of foreign direct investment inflows in OPEC countries. This paper aims to find out the major determinants of foreign direct investment in the periods 1985 - 2014 using the Generalized...

CORPORATE BOARD DIVERSITY AND FINANCIAL PERFORMANCE OF INSURANCE COMPANIES IN NIGERIA: AN APPLICATION OF PANEL DATA APPROACH

The major objective of this study is to investigate the relationship between board diversity and financial performance of insurance companies in Nigeria, with specific reference to how gender diversity, ethnic diversity,...

ECONOMIC FREEDOM AND ECONOMIC GROWTH IN MENA COUNTRIES

Most studies of the relationship between economic freedom and growth of GDP have found a positive correlation. One problem in this area is the choice of measure of economic freedom. A single measurement does not reflect...

Download PDF file
  • EP ID EP2030
  • DOI -
  • Views 426
  • Downloads 22

How To Cite

Hasan Ayaydın, Pınar Hayaloglu (2014). THE EFFECT OF CORRUPTION ON FIRM GROWTH: EVIDENCE FROM FIRMS IN TURKEY. Asian Economic and Financial Review, 4(5), 607-624. https://europub.co.uk/articles/-A-2030