Working Paper | HBS Working Paper Series | 2013

An Analysis of Firms' Self-Reported Anticorruption Efforts

by Paul M. Healy and George Serafeim


We use Transparency International's ratings of self-reported anticorruption efforts for 480 corporations to analyze factors underlying the ratings. Our tests examine whether these forms of disclosure reflect firms' real efforts to combat corruption or are cheap talk. We find that the ratings are related to enforcement and monitoring, country and industry corruption risk, and governance variables. Specifically, firms with high anticorruption ratings are domiciled in countries with low corruption risk ratings and strong anticorruption enforcement, operate in high corruption risk industries, have recently faced a corruption enforcement action, employ a Big Four audit firm, and have a higher percentage of independent directors. Controlling for these effects and other determinants, we find that firms with lower residual ratings have relatively higher subsequent media allegations of corruption. They also report higher future sales growth and show a negative relation between profitability change and sales growth in high corruption geographic segments. In contrast, there is no relation between residual anticorruption ratings, sales growth, and changes in profitability in low corruption geographic segments. The net effect on valuation from sales growth and changes in profitability is close to zero. Given this evidence, we conclude that, on average, firms' self-reported anticorruption efforts signal real efforts to combat corruption and are not merely cheap talk.

Keywords: corruption; bribery; sustainability; reporting; accountability; disclosure; international business; corporate sustainability; social responsibility; Crime and Corruption; Profit; Corporate Disclosure; Policy; Growth and Development; Law Enforcement; Performance; Sales;


Healy, Paul M., and George Serafeim. "An Analysis of Firms' Self-Reported Anticorruption Efforts." Harvard Business School Working Paper, No. 12-077, February 2012. (Revised March 2013, March 2014.)