Corruption, national culture and corporate investment: European evidence

Abstract

In this paper, we provide further evidence about the influence of corruption on corporate investment. Using a large sample of the European region non-financial firms for the period 2011–2020, our results suggest that corruption in Europe negatively affects corporate investment, thus, supporting the ‘sanding the wheel' hypothesis. This relationship is moderated by all six dimensions of the national culture proposed by Hofstede. Using appropriate panel data methodology, namely GMM estimations, we find that a higher degree of uncertainty avoidance, power distance, masculinity, and indulgence exacerbate the adverse effects of corruption on corporate investment while a higher degree of long-term orientation and individualism alleviates this effect.

KEYWORDS:

• National culture
• corruption
• Hofstede
• corporate investment
• Europe

JEL Classification Codes:

• G32
• M16
• M21

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by Hercule Programmes [grant number EU proposal 878513 Hercule III 2019 Legal Training and Studies, HERCULE-2019-LT-AG]; Spanish Ministry of Science and Innovation [grant number PID2020-114797GB-I00].

Notes on contributors

Conrado Diego García-Gómez

Dr. Conrado Diego García-Gómez is an Associate Professor of Finance at the University of Valladolid (Spain) and is currently a visiting researcher at University of Porto (Portugal). He has been visiting fellow and professor at the Catholic University of Leuven (Belgium), University of Porto, University of Coimbra (Portugal) and University of Pau et des Pays de l’Adour (France). His research has been published in peer-reviewed international journals such as Tourism Management, Tourism Economics, Journal of Hospitality and Tourism Management, BRQ Business Research Quarterly, Research in International Business and Finance, Finance Research Letters and Eurasian Business Review. His research interests focus on corporate finance and governance, culture and finance and hospitality management.

Ender Demir

Dr. Ender Demir is an Associate Professor of Finance at Department of Business Management, Rejyvakik University, Iceland. Dr. Demir has received his Ph.D. in Business from Ca Foscari University, Italy. Dr. Demir is the founder and conference coordinator of Eurasia Business and Economic Society (EBES). He has published his research in peer-reviewed international journals, including Tourism Management, Emerging Markets Review, Finance Research Letters, Journal of Financial Stability, Annals of Tourism Research, and Journal of International Financial Markets, Institutions & Money. His research interests are corporate finance, hospitality finance, financial economics, and cryptocurrencies.

José María Díez-Esteban

Dr. José María Díez-Esteban studied Economics and Business Administration in University of Santiago de Compostela (Spain). He is a Senior Lecturer of Corporate Finance in the Department of Business at the University of Burgos. He received his PhD in Economics and Business Administration at the University of Burgos. His research has been published in international journals such as the British Journal of Management, Journal of Intellectual Capital, Management Decision. His current research focuses on governance, dividend policy and corporate risk taking.

Edmundo Lizarzaburu Bolaños

Dr. Edmundo Lizarzaburu Bolaños is a Professor and Research of Finance at ESAN University in Peru. He has served as visiting professor at ESPOL (Ecuador), University of Valladolid (Spain) and USTomas – Icontec (Colombia). He received his Ph.D. in management form University Carlos III (Spain). He is as a consultant for public and private entities and accredited in risk management, compliance and anti-bribery. He has presented numerous research at conferences and published in various journals indexed in Scopus and Web of Science.