Foreign ownership and bribery in Chinese listed firms: An institutional perspective

Abstract

<p>While financial globalization serves to diffuse positive corporate practices worldwide, there remains a scarcity of studies investigating the potential of foreign ownership in alleviating corporate bribery—a pervasive illegal practice in emerging markets. This study, rooted in institutional theory, examines how foreign ownership affects corporate bribery expenditures in emerging markets, incorporating crucial factors that encapsulate local regulatory, normative, and cognitive pressures. Leveraging longitudinal panel data on Chinese listed firms, our findings reveal that foreign ownership significantly reduces corporate bribery expenditures, underscoring the disciplining role of foreign investors. Moreover, such effect is weakened by regional corruption and regional gambling prevalence, yet amplified by the overseas experience of top executives. These findings yield insights into how international investors affect bribery in investee firms, considering the intricate fabric of local institutional contexts.</p>