Estimations of business exposure to corruption in Malaysia

Purpose - This study aims to investigate the level of business exposure to corruption in Malaysia. The authors estimate the effect of bribe requests from business establishments by public officials and identify the level of vulnerability of businesses to such requests. Design/methodology/approach - This study uses firm-level data from the World Bank Malaysia Enterprise Survey 2014. The analyses are based on binary logit, tobit and generalized ordered logit regressions. Findings - The authors find that one-fifth of firms applying for construction permits or had visits or meetings with tax officials were expected to pay bribes. Firms’ encounters with corruption were higher still when applying for import (29%) or operating license (24.7%). About 40% of the firms considered corruption an obstacle to their business operations to the degree of moderate, major and even severe. On average, 11% of firms’ total annual sales were apportioned for informal gifts or “speed money.” The authors also find that larger, younger and women-managed/owned companies were more likely to be targeted for bribe payments. The amount of bribe paid by foreign-owned firms was higher than the local firms. Manufacturing firms had lower incidences of bribe requests, but the amount paid was higher than services-related companies. Firms run or owned by women also, on average, paid a higher amount bribe. Social implications - These findings should be taken into consideration in the efforts to eradicate corruption affecting businesses in Malaysia. Originality/value - This study is unique in the sense that it is based on firm-level data for a Malaysian case.