Bribery environments and manufacturing SME efficiency: Evidence from a transitional economy

Abstract

The corporate governance literature focuses on the firm-level corrupt environments of firm performance and does not pay sufficient attention to the importance of competition and CEO gender. Motivated by recent developments integrating a bribery perspective with contextual moderators in firm efficiency studies, this study attempts to present empirical evidence regarding the bribery-efficiency relationship in Vietnamese small- and medium-sized enterprises (SMEs) from 2011 to 2015. Using the stochastic frontier approach to estimate firm technical efficiency scores, we find that an environment characterized by a high level of bribery has an adverse effect on firm efficiency. We also find that a dispersed business environment characterized by considerable heterogeneity in corruption perception is associated with an increase in firm efficiency. Furthermore, the results suggest that firms facing competitive forces are associated with less efficiency relative to firms without pressure. Moreover, efficiency tends to be greater for firms with a lower propensity to behave corruptly, such as firms managed by females. To investigate whether the effects of bribery on efficiency are dependent on firm competitive pressure and gender attitudes, we check whether these relations are particularly strong for firms highly pressured by competition and firms run by a female CEO; our results show strong support for this conjecture. The effects of competition and gender are particularly strong for firms operating in provinces with a low level of transparent competitiveness, while no effect is observed for firms that operate in provinces with a high level of competitive governance.