Risk-loving managers bribe more with no payoff

I studied the role of managerial traits in company-level corruption among Vietnamese small and medium enterprises. Vietnam is a Socialist republic that has experienced high economic growth; however, they also have widespread corruption.

According to Transparency International’s Corruption Perception Index, Vietnam is ranked 96th out of 198 countries (for comparison, Estonia ranks 18, USA 23, Russia 137).  It is interesting to investigate how companies, and in particular managers, do business in corrupt environments like Vietnam.

Vietnam has experienced high economic growth and widespread corruption. Image credit: Tran Phu on Unsplash

My study builds on two different streams of literature. Firstly, previous research has indicated that an individual’s five personality traits (extraversion, agreeableness, openness, conscientiousness, and neuroticism) can predict behaviour. This includes deviant and anti-social behaviour, such as plagiarism, criminal decision making, and workplace deviance. Corruption could be also specified as deviant behaviour that breaks legal or moral norms. Hence, one may argue that there could be a link between personality traits and corruption.

Another stream of literature posits that managerial personality traits are important determinants of business success and company performance. Although managerial personality traits seem to be identical to the five personality traits, they are specific to entrepreneurs and managers. For example, the traits of innovativeness and locus of control are positively associated with revenue. At the same time, risk aversion negatively relates to revenue.

In addition, there is evidence that suggests positive effects of corruption on company performance. This happens in cases where institutional quality is weak. Institutional quality refers to how good the rule of law, control of corruption, government effectiveness and accountability, and political stability are. (NB! There are also studies that show negative effects of corruption on company performance).

Accordingly, a manager’s personality traits serve as possible predictors of corruption. As managers are the ones who participate in corrupt negotiations, their personality traits could play an important role in deciding to pay bribes to public officials.

These managerial personal traits are locus of control, innovativeness, and risk loving. To date, studies have overlooked these factors in relation to bribery. My paper fills this void by exploring the role of managerial personality traits in managers’ tendency to pay bribes.

Personality traits and corruption
Innovativeness and risk loving may positively increase bribery, whereas locus of control may decrease the probability of paying bribes.

My findings suggest that risk loving and innovativeness may positively increase the likelihood of paying bribes. On the other hand, locus of control may decrease the probability of paying bribes to public officials. Since a bribe is a complicated and illegal way of doing business, innovative managers may find novel ways of paying bribes. In addition, it is also risky, so a risk-loving manager may have higher tendency to pay bribe to get things done.

Moreover, my paper also investigates the link between managerial personality traits and company performance by introducing a new corruption variable. Findings suggest that the positive effect of innovativeness on company performance disappears if a manager has paid a bribe. Also, the positive link between risk loving and company performance becomes negative.

To sum up, this paper suggests two possible results. Firstly, managerial personality traits could be an important predictor of bribing behaviours. Secondly, bribes may have negative effect on company performance and the risk-loving (and innovativeness) nexus. In other words, if a risk-loving manager pays bribes, this may not give the expected positive outcome for the company, even if it is in Vietnam.

Since this paper uses a Vietnamese dataset, these results may not be generalizable. Future research should replicate similar studies in other countries.

Gaygysyz Ashyrov is a Research Fellow in Economic Modelling at the University of Tartu. Recently, he received the research award 2020 for his paper on the behaviour of corrupt managers. The central bank of Estonia issued the award in the category of doctoral work.

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