Corruption And Firm Growth

This primary objective of this research is to find out the relationship between corruption proxied by informal payment and the growth of firms among a list of surveyed firms in Nigeria.The research adopts the instrumental variable technique in addressing the potential endogeneity problem of informal payment because of its high tendency of being plagued with measurement error.We adopt industry averages of informal payments as the instrument.We use the Two-Stage Least Squares(2SLS)estimation approach controlling for city fixed-effects for the sake of the city heterogeneity.The research employs data of Nigerian firms obtained from the World Bank Enterprise Survey(WBES)for the years,2006 and 2008.The results reveal negative and statistically significant causal effects of corruption on firm growth,albeit small in magnitude relative to standard estimates from the literature.