Who Bribes? Evidence from the United Nations’ Oil-for-Food Program

Abstract

How do managers react in an environment where bribery is likely to bring high rewards, but also presents high risks? We examine the supply side (firms’ illicit payments) of bribery in a global setting using the United Nations’ (UN) Oil-for-Food Program, part of UN sanctions on Iraq. Some companies helped Iraq circumvent UN sanctions through bribe payments in the form of illicit surcharges. Our transaction-level analysis of factors affecting bribe payments draws on the economic theory of crime, agency theory, and home-country institutions. Results suggest that firms pay larger bribes when there are stronger financial and managerial incentives, but pay less when their home-countries have implemented the OECD Anti-Bribery Convention. We find little relationship between a widely-used country-level corruption perception index and firms’ actual bribery.