Causes and consequences of firm disclosures of anticorruption efforts

Using Transparency International's ratings of firm disclosures on anticorruption efforts, we find that disclosures are related to firms' country and industry exposures to corruption, and to enforcement and monitoring variables. We then examine whether firms' residual anticorruption disclosures are related to subsequent allegations of corruption and subsequent performance. Firms with abnormally low anticorruption disclosures have higher subsequent media allegations of corruption than firms with abnormally high disclosure. They also report higher future sales growth, and a negative relation between profitability and sales growth in high corruption countries. None of those differences is observed across firms with high and low abnormal anticorruption disclosures in low corruption countries. We interpret these findings as indicating that firms with abnormally high disclosures enforce policies designed to combat corruption. These policies are accompanied by lower subsequent allegations of corruption, and lower but more profitable sales growth in high corruption countries.