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Corruption and firm growth: evidence from Nigeria

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  • Philip Akrofi Atitianti

    (Zhongnan University of Economics and Law)

  • James Chukwubudom Chikelu

Abstract

We assess the impact of corruption on firm growth using the World Bank Enterprise Survey (WBES) data on Nigerian firms for the periods 2006 and 2008. We measure corruption as firms’ informal payments to get things done faster and bypass due process. Firm growth is measured as sales growth of firms. To address endogeneity issues and the possibility of measurement error, we use industry averages of firms’ informal payments as an instrument in a Two-Stage Least Squares (2SLS) estimation. The results we obtain for both 2006 and 2008 confirm that informal payments substantially hinder firm growth in Nigeria. The results are robust and still hold after controlling for city variation and omitting outliers. The findings suggest that in the quest to improve firm growth, measures that focus on implementing frameworks that shorten the duration required for documentation and other firm-related services provided by the government would discourage informal payments and thus, improve firms’ sales growth.

Suggested Citation

  • Philip Akrofi Atitianti & James Chukwubudom Chikelu, 2021. "Corruption and firm growth: evidence from Nigeria," SN Business & Economics, Springer, vol. 1(5), pages 1-18, May.
    • Handle: RePEc:spr:snbeco:v:1:y:2021:i:5:d:10.1007_s43546-021-00071-8
    DOI: 10.1007/s43546-021-00071-8
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    More about this item

    Keywords

    Nigeria; Corruption; Firm growth; Sales growth; Informal payment; Instrumental variable;
    All these keywords.

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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