By Covering Business April 21, 2012
By Covering Business Staff
The New York Times’s Saturday exposé of bribery at Wal-Mart’s Mexican subsidiary revealed that the company had made “suspect payments” totaling more than $24 million. In exchange, it received enough zoning approvals and other community support to rule the country’s retail market. In other words, the bribes more than paid for themselves.
Although the Obama administration has significantly stepped up the enforcement of anti-bribery laws, corruption remains a problem largely because it is so effective. A group of researchers at Hong Kong Baptist University and the University of Cambridge set out to discover exactly how effective. By looking at the market capitalization of companies that recently carried out successful bribes (and subtracting the cost of the bribe itself), they came up with a rough estimate for a return on bribery. They published their results in a working paper through the National Bureau of Economic Research.
Among the group’s findings:
The median bribe paid by a company in the group’s sample of 166 cases was $2.5 million. Companies that were underperforming tended to pay higher bribes than companies meeting their sales goal. Higher-ranked government officials also commanded higher bribes than lower-ranked bureaucrats.
A company’s market value increased by roughly $11 for every dollar of the bribe they paid.
Companies that bribe officials in countries with looser regulations and fewer disclosure requirements on politicians’ source of income receive more per dollar of their bribe. So do companies that bribe in countries with smaller newspaper circulations.
Read the full paper.
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