Estimations of business exposure to corruption in Malaysia
| Pages | 1273-1287 |
| DOI | https://doi.org/10.1108/JFC-04-2020-0058 |
| Date | 07 July 2020 |
| Published date | 07 July 2020 |
| Author | Selamah Abdullah Yusof,Mohd Nahar Mohd Arshad |
| Subject Matter | Financial crime,Accounting & Finance,Financial risk/company failure |
Estimations of business exposure
to corruption in Malaysia
Selamah Abdullah Yusof and Mohd Nahar Mohd Arshad
Department of Economics, International Islamic University,
Kuala Lumpur, Malaysia
Abstract
Purpose –This study aims to investigate the level of business exposure to corruption in Malaysia. The
authors estimate theeffect of bribe requests from business establishments by publicofficials and identify the
level of vulnerabilityof businesses to such requests.
Design/methodology/approach –This study uses firm-level data from the World Bank Malaysia
Enterprise Survey 2014. The analyses are based on binary logit, tobit and generalized ordered logit
regressions.
Findings –The authors find that one-fifth of firms applying for construction permits or had visits or
meetings with tax officialswere expected to pay bribes. Firms’encounters with corruption were higher still
when applying for import (29%) or operatinglicense (24.7%). About 40% of the firms considered corruption
an obstacle to theirbusiness operations to the degree of moderate,major and even severe. On average, 11% of
firms’total annual sales were apportioned for informal gifts or “speed money.”The authors also find that
larger, younger and women-managed/owned companies were morelikely to be targeted for bribe payments.
The amount of bribe paid by foreign-ownedfirms was higher than the local firms. Manufacturing firms had
lower incidences of bribe requests, but theamount paid was higher than services-related companies. Firms
run or ownedby women also, on average, paid a higher amountbribe.
Social implications –These findings should be taken into consideration in the efforts to eradicate
corruptionaffecting businesses in Malaysia.
Originality/value –This study is unique in the sense that it is based onfirm-level data for a Malaysian
case.
Keywords Malaysia, Corruption, Business, Obstacle, Bribe payments, Bribe requests
Paper type Research paper
1. Introduction
Corruption destroys societies. It is a social disease when it becomes accepted as a norm in
doing politics, government and business (Mackey et al., 2016). Corrupt practices such as
favoritism, bribery, graft,embezzlement and nepotism are costly and the adverse effects are
long-lasting. In business, corruption discourages private-sector development and
encourages inefficiency. It creates obstacles to the business sector by way of bureaucratic
obstacles, intimidations, financial costs and psychological burdens of undertakingbusiness
ventures. The high incidence of corruption means an additional burden on businesses,
undermining their competitiveness. Unlike a tax, which is legal, structured and integrated
into the cost of firms’operation, corruption is illegal, unpredictable and disruptive to
businesses, resulting in cost complication, lower profits and inefficiency to the business
community (Mauro,1995).
Efforts against corruption,whether petty or grand forms of it, are essential to ensure the
integrity and stability of a country. Managing the public perceptions, be it domestic or
international, is also required to ensure sustained confidence in the efforts undertaken. All
these efforts are vital for a developing country such as Malaysia, which strives to be a
Estimations of
business
exposure
1273
Journalof Financial Crime
Vol.27 No. 4, 2020
pp. 1273-1287
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-04-2020-0058
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