Ayyagari, MeghanaDemirgüç-Kunt, AsliMaksimovic, Vojislav2012-03-192012-03-192010-07-01https://hdl.handle.net/10986/3873This paper investigates corruption and tax evasion and their firm-level determinants across 25,000 firms in 57 countries, a large fraction of which are small and medium enterprises in developing countries. Firms that pay more bribes also evade more taxes. Corruption acts as a tax on innovation, particularly that of small and young firms. Innovating firms pay a larger percentage of their revenues in bribes to government officials than non-innovating firms. They do not, however, pay more protection money to private parties than other firms. Comparing the magnitudes of bribes and taxes evaded, innovating firms and firms that use formal finance are more likely to be net victims. The findings point to the challenges facing innovators in developing countries and the role of banks in curbing corruption and tax evasion.CC BY 3.0 IGOACCESS TO CREDITAGENCY PROBLEMANTI-CORRUPTIONANTICORRUPTIONASSETSASYMMETRIC INFORMATIONBANK ACCESSBANK FINANCINGBANK LOANBANK POLICYBANKING SECTORBANKSBIASESBORROWINGBRIBEBRIBERYBRIBESBRIBINGBUSINESS ACTIVITIESBUSINESS ASSOCIATIONSBUSINESS PEOPLECHAMBERS OF COMMERCECHECKSCONFIDENCECOOPERATIVESCORPORATE FINANCECORPORATE GOVERNANCECORPORATE TAXCORPORATE TAX RATESCORPORATE TAXESCORRUPTCORRUPT OFFICIALCORRUPT OFFICIALSCORRUPTIONCORRUPTION ACTSCORRUPTION PERCEPTIONCORRUPTION PERCEPTION INDEXCREDIBILITYCREDITORSCRIMECRIMINALCRIMINALSDEBTDEBT STRUCTUREDEVELOPING COUNTRIESDEVELOPMENT FINANCEDISPUTE RESOLUTIONDUMMY VARIABLEDUMMY VARIABLESEARNINGSECONOMIC ACTIVITYECONOMIC DEVELOPMENTECONOMIC GROWTHEDUCATION LEVELELECTRICITYEMERGING MARKETSENTERPRISE PERFORMANCEENTREPRENEURENTREPRENEURSEQUIPMENTEXCHANGE RATEEXPENDITURESEXPORTEREXPORTERSEXTERNAL FINANCEEXTERNAL FINANCINGEXTORTIONFINANCIAL DEVELOPMENTFINANCIAL INSTITUTIONSFINANCIAL INTERMEDIARIESFINANCIAL INTERMEDIATIONFINANCIAL SECTOR REFORMFINANCIAL SYSTEMFIRM PERFORMANCEFOREIGN FIRMSFORMAL BANKFORMAL ECONOMYFORMAL FINANCEGIFTSGOVERNANCE ISSUESGOVERNMENT CORRUPTIONGOVERNMENT OFFICIALSGOVERNMENT REGULATIONGOVERNMENT REGULATIONSIDSINCOME CATEGORIESINCOME GROUPINCOME LEVELSINFORMAL FINANCEINFORMAL FINANCINGINITIATIVEINSTRUMENTINTERNATIONAL BANKINVESTMENT CLIMATEINVESTMENT FUNDJUSTICELAWSLEGAL CONSTRAINTSLEVEL PLAYING FIELDLICENSESLOANMARGINAL TAX RATESMONEYLENDEROBSTACLES TO GROWTHOPERATING COSTSOPTIMAL DEBT STRUCTUREOVERDRAFTOVERDRAFT FACILITYOWNERSHIP STRUCTUREOWNERSHIP STRUCTURESPERSONAL GAINPOLICEPOLITICAL CORRUPTIONPOLITICAL ECONOMYPOLITICIANSPRIVATE CREDITPRIVATE GAINPRIVATE PARTIESPRIVATE SECTORPROFIT MARGINPROFIT MARGINSPROFITABILITYPROPERTY RIGHTSPROPRIETORSHIPSPUBLICPUBLIC ECONOMICSPUBLIC FINANCEPUBLIC FINANCESPUBLIC OFFICIALSPUBLIC SECTORPUBLIC SECTOR REFORMREFORM PROGRAMSREINVESTMENTREINVESTMENT RATESREVENUE COLLECTIONSALES GROWTHSALES REVENUESELF-FINANCESHADOW ECONOMYSHAREHOLDERSSOCIAL CAPITALSOCIAL SECURITYSTOCK MARKETTAXTAX AVOIDANCETAX BURDENTAX COLLECTIONTAX COMPLIANCETAX EVASIONTAX RATESTAX REGULATIONTAX REPORTINGTAXATIONTAXPAYER COMPLIANCETAXPAYERSTELEPHONE LINETHEFTTRANSACTIONTRANSITION COUNTRIESTRANSITION ECONOMIESTRANSPARENCYVIOLENCEWORKING CAPITALWorld Bank10.1596/1813-9450-5389