Influence of corruption on state-owned enterprise expenditures

Abstract

This study aims to analyze the effect of corruption on state-owned enterprises (SOEs) and how this practice could be harmful to the economy, despite what the grease on the wheels hypothesis suggests. A database built from three other databases was used. It contained only stock market listed enterprises. After the data treatment process, only 96,379 observations remained, from companies from 41 countries between 2002 and 2011. To achieve the expected results this study used the Difference-in-Differences technique in order to measure the effect of political influence on SOEs spending after the 2008 financial crisis. The results confirmed the hypothesis of the study, demonstrating that within environments with high levels of corruption, politicians use their influence for political/private gain purposes.

Keywords:
political environment; corruption; state enterprises; public spending