What drives firms' commitment to fighting corruption? Evidence from the UK

Sarhan, Ahmed A and Al‐Najjar, Basil (2023) What drives firms' commitment to fighting corruption? Evidence from the UK. Journal of International Financial Management and Accounting, 34 (3). pp. 791-825. ISSN 0954-1314

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Abstract

The recent leak of the FinCEN files has highlighted the widespread presence of corruption in developing and developed economies, including the UK. Accordingly, this study aims to investigate the factors that drive companies to implement measures for preventing corruption in developed countries using FTSE 350 nonfinancial firms. Specifically, the research examines the influence of corporate social responsibility (CSR) commitments, board structure, and shareholding structure on adopting strategies, policies, and procedures aimed at countering corruption. Drawing upon agency, stakeholder, and legitimacy theories, our empirical evidence supports that CSR commitments and board independence positively influence firms' engagement in anticorruption measures. Conversely, institutional and managerial shareholdings are found to have a negative association with firms' efforts to combat corruption. In addition, the study shows that the effect of board characteristics became more pronounced following the enactment of the UK Bribery Act 2010, indicating risk-averse behavior. Various models, including cross-sectional and two-stage least squares (2SLS), are employed to analyze the data. Our findings have significant implications for understanding the complex relationship between CSR, corporate governance, and the ethical infrastructure of organizations. Ultimately, our results provide valuable insights for policymakers, companies, and other stakeholders in developing effective strategies, policies, and procedures to combat corruption activities.