Bribery environments and firm performance: Evidence from CEE countries

•How does bribery impact sales and labor productivity growth of firms in CEE countries?•We combine firm financial information with firm bribery practices.•A higher bribery mean retards both sales and labor productivity growth of firms.•A higher bribery dispersion of individual firm bribes facilitates firm performance.•We explain the divergent effects of corruption found in previous literature.

We examine the relation between bureaucratic corruption and firm performance in CEE countries. We show that divergent consequences of corruption found in previous studies can be explained by the specifics of the local bribery environment in which firms operate. A higher mean bribery is associated with lower firm performance, while higher dispersion of individual firm bribes appears to facilitate it. We also conduct a detailed analysis by firm sector and size, and countries' institutional environments.