The dark side of corporate digital transformation: Evidence from corporate bribery

Abstract

This paper explores how companies' ability to conceal its illicit activities impacts bribery in China. We find a positive relationship between corporate digital transformation (DT) and bribery. This finding is robust to several endogeneity and robustness tests. Channel tests show that decreased bribery costs explain the positive association between DT and corporate bribery. Specifically, the main effect is more pronounced for firms that operate in environments with high corruption or firms that face less media monitoring. Furthermore, we find that the impact of DT on bribery is more pronounced for multinational firms and those operating within highly competitive industries. This suggests that a firm's willingness to bribe is a prerequisite for their leveraging DT to engage in bribery. Collectively, our study highlights that DT can enhance corporate ability to conceal illicit activities, thereby exacerbating bribery behavior.