An Empirical Analysis of Corruption and Firm Growth across Southeast Asian Economies Using World Bank Enterprise Data

Abstract

This study examines the relationship between corruption and firm performance in Southeast Asian economies using firm-level data from the World Bank Enterprise Surveys (2005– 2024). The dataset comprises over 15,900 firms across ten countries. Given the pooled nature of the data, arising from irregular survey frequency and random sampling, the analysis employs a pooled Ordinary Least Squares (OLS) model with country fixed effects to control for unobserved heterogeneity. Firm performance is measured using sales growth and labor productivity. The empirical results indicate a significant non-linear negative relationship between corruption and firm performance, with stronger adverse effects at low to moderate levels of bribery. The findings consistently support the “sand the wheels” hypothesis, suggesting that corruption acts as a constraint on firm growth rather than facilitating efficiency. Overall, the results demonstrate that even low levels of corruption impose measurable economic costs on firms. These findings underscore the importance of reducing bureaucratic inefficiencies and enhancing transparency to improve firm performance and support sustainable economic development.