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Corporate entertainment expenses and corruption in public procurement

Author

Listed:
  • Kang, Sungwon
  • Kim, Daehwan
  • Kim, Geonhyeong

Abstract

Viewing corporate entertainment of public officials as a form of bribes, Korea recently adopted a strong regulation against such practice (the Antigraft Act of 2016). In this paper, we investigate whether the regulation succeeded in reducing corruption in public procurement. An examination of the procurement system in Korea suggests that bribe-paying firms submit lower bids to procurement auctions than non-bribe-paying firms and that the difference in bid aggressiveness between bribe-paying and non-bribe-paying firms can be used as an indicator of the prevalence of corruption. Using the bidding data of firms participating in Korea Online E-Procurement System (KONEPS) auctions, we document that this indicator of corruption declined after the new regulation was adopted. We conclude that the new regulation reduced the entertainment-expense channel of corruption in public procurement.

Suggested Citation

  • Kang, Sungwon & Kim, Daehwan & Kim, Geonhyeong, 2023. "Corporate entertainment expenses and corruption in public procurement," Journal of Asian Economics, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:asieco:v:84:y:2023:i:c:s1049007822001105
    DOI: 10.1016/j.asieco.2022.101554
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    Cited by:

    1. Burger, Anže & Marinč, Matej & Polanec, Sašo & Kotnik, Patricia, 2024. "Public procurement and bank lending," Finance Research Letters, Elsevier, vol. 66(C).

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    More about this item

    Keywords

    Public procurement auction; Corruption; Bribery; Antigraft act; Corporate entertainment expenses;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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