CONCLUSION
Given the increased demand from the stakeholders and regulators for the legal and ethical compliance of global companies while conducting business, it is necessary for organizations to implement a comprehensive range of anti-corruption policies and management systems to mitigate the risks posed by the lack of transparency and potential for corruption within organizations. This will ensure that stakeholders have a clearer understanding of the extent to which a company’s operations are ethically responsible and make the company more accountable for its activities in a given country. This paper is motivated by the lack of empirical work on the impact of firm-level corporate social responsibilities on corruption risk. This issue is especially relevant since companies are under increasing pressure from multiple stakeholders to be socially and environmentally responsible. A number of studies provide evidence that corruption is associated with lower long-term economic growth (see, for example, Krueger, 1977; Mauro, 1995; Murphy et al., 1991). Another strand of literature shows that managerial empire building and perquisite consumption are expected to be higher in a weak regulatory oversight environment. La Porta et al. (2001) show that corruption can reduce the legal protection of shareholders, particularly minority shareholders. Given the above findings, it is important to understand which firm-level and country-level factors mitigate the degree of corruption risk of firms. Our paper contributes to the literature in a number of ways. First, our paper is the first one to document that a firm’s CSR engagement is found to reduce firm-level corruption risk.
