Firm Accounting Practices, Accounting Reform and Corruption in Asia

Despite rapid economic growth and assiduous efforts in anti-corruption campaigns, many Asian economies continue to be plagued with rampant corruption problems; and in a number of countries, the progress towards corruption reduction has stagnated over the last decade as measured by corruption perception indices. This paper focuses on the corporate sector as the main source of corruption problems in Asia, with particular emphasis on the impact that firm accounting practices have on the level of bribery. Using a unique cross-country firm-level dataset, we examine some distinct characteristics of bribery in corporate Asia, and empirically test the relationship between firm accounting practices and bribery. Our findings suggest that better accounting practices can help reduce both the incidence of bribery activities and the amount of bribe payments, but conforming to high quality accounting standard alone will not necessarily enhance the quality of accounting practices and thus will not automatically bring down the level of bribery.