Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcasts
  • About Us
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Cold Call Podcast
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    • COVID-19 Business Impact Center
      COVID-19 Business Impact Center
      Causes and Consequences of Firm Disclosures of Anticorruption Efforts
      09 Mar 2012Working Paper Summaries

      Causes and Consequences of Firm Disclosures of Anticorruption Efforts

      by Paul Healy and George Serafeim
      Academic research on corruption has typically focused on its macro causes and consequences. While the country level is certainly important to understand, it is at the firm level where many questions remain unanswered. This study examines 480 of the world's largest companies, using ratings by Transparency International of firms' public disclosures of strategy, policies, and management systems for combatting corruption. Professors Paul Healy and George Serafeim find that firm disclosures are related to enforcement and monitoring costs, such as home country enforcement, US listing, big four auditors, and prior enforcement actions. Disclosures also reflect industry and country corruption risks. Meanwhile the financial implications of fighting disclosure are more nuanced. Key concepts include:
      • While firm-level research on corruption is still at the formative stage, findings suggest that disclosure is more than cheap talk.
      • Firms with high disclosure on their anticorruption efforts are committed to fighting corruption. The policies and enforcement actions reflected in their disclosures help to protect their public reputation and profitability, but at the cost of slower sales growth in high corruption risk markets.
      • Firms with abnormally low disclosure have roughly 15 percent higher sales growth in corrupt country markets than their high disclosure peers. But this higher growth is accompanied by lower profit margins and return on equity.
      • Firms with abnormally high anticorruption ratings have a lower frequency of subsequent allegations of corruption in the media, suggesting that disclosures reflect their commitment to fighting corruption.
      • Future research could examine (among other issues) what factors, other than monitoring/enforcement costs and risk exposures, explain the differences in firms' level of disclosure and commitment to fight corruption.
      LinkedIn
      Email

      Author Abstract

      Using Transparency International's ratings of firm disclosures on anticorruption efforts, we find that disclosures are related to firms' country and industry exposures to corruption, and to enforcement and monitoring variables. We then examine whether firms' residual anticorruption disclosures are related to subsequent allegations of corruption and subsequent performance. Firms with abnormally low anticorruption disclosures have higher subsequent media allegations of corruption than firms with abnormally high disclosure. They also report higher future sales growth, and a negative relation between profitability and sales growth in high corruption countries. None of those differences is observed across firms with high and low abnormal anticorruption disclosures in low corruption countries. We interpret these findings as indicating that firms with abnormally high disclosures enforce policies designed to combat corruption. These policies are accompanied by lower subsequent allegations of corruption, and lower but more profitable sales growth in high corruption countries.

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: February 2012
      • HBS Working Paper Number: 12-077
      • Faculty Unit(s): Accounting and Management
        Trending
          • 24 Feb 2021
          • Lessons from the Classroom

          What History's Biggest Wars Teach Us About Leading in Peace

          • 25 Feb 2019
          • Research & Ideas

          How Gender Stereotypes Kill a Woman’s Self-Confidence

          • 17 May 2017
          • Research & Ideas

          Minorities Who 'Whiten' Job Resumes Get More Interviews

          • 13 Jul 2020
          • Research & Ideas

          Merck CEO Ken Frazier Discusses a COVID Cure, Racism, and Why Leaders Need to Walk the Talk

          • 09 Feb 2021
          • Cold Call Podcast

          Developing Resilience on the Path to Becoming a CEO

      Paul M. Healy
      Paul M. Healy
      James R. Williston Professor of Business Administration
      Contact
      Send an email
      → More Articles
      George Serafeim
      George Serafeim
      Charles M. Williams Professor of Business Administration
      Contact
      Send an email
      → More Articles
      Find Related Articles
      • Accounting

      Sign up for our weekly newsletter

      Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
      ǁ
      Campus Map
      Harvard Business School Working Knowledge
      Baker Library | Bloomberg Center
      Soldiers Field
      Boston, MA 02163
      Email: Editor-in-Chief
      →Map & Directions
      →More Contact Information
      • Make a Gift
      • Site Map
      • Jobs
      • Harvard University
      • Trademarks
      • Policies
      • Digital Accessibility
      Copyright © President & Fellows of Harvard College