Value relevance of alleged corporate bribery expenditures implied by accounting information

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Abstract

We examine the value relevance of alleged corporate bribery expenditure implied by accounting information. Existing studies have generated mixed evidence regarding the impact of corporate bribery on firms, and often rely on survey-based data that could be prone to bias. The mandatory accounting disclosure of entertainment and travel costs (ETC) by Chinese firms offers a useful research setting for extracting information on alleged corporate bribery expenditure. We show that this measure is negatively related to stock value, but the effect is less pronounced for firms that are underperforming, less supported by government, and based in less-developed regions. Our findings reveal that investors account for alleged corporate bribery expenditure in their valuation decisions, and imply that ETC disclosure may contribute to the scrutiny of corporate bribery.

Bibliographical metadata

Original languageEnglish
Pages (from-to)592–608
JournalJournal of Accounting and Public Policy
Volume35
Issue number6
Early online date24 Aug 2016
DOIs
Publication statusPublished - Nov 2016