DO ONLY HIGHER PENALTIES HELP TO ACHIEVE COMPLIANCE IN SELECTED EMERGING MARKETS?

Abstract

Living by the rules is a struggle that emerging markets are facing. High corruption that affects those emerging markets means low levels of compliant behaviour seen through not ‘following the rules set by various laws and regulations. This paper aims to find whether imposing high penalties for committed offenses such as public corruption could be considered a plausible option for increasing levels of compliant behaviour or whether introducing other actions would help emerging markets reach that goal. The two hypotheses will be tested by the quantitative approach considering the sample of 27 countries classified as emerging markets (among them also the following European countries: Czech Republic, Greece, Hungary, and Poland) by applying a non-parametric statistical test to find whether a correlation between high penalties for public corruption and compliant behaviour exists and on the other hand, if a correlation between other actions and compliant behaviour exists. Results of the research point to the fact that, although increasing penalties is not perceived as a plausible option, raising awareness and incentivizing anti-corruption activities through other actions such as improved education and increased wages of public officials presents an excellent potential for beginning the battle with corruption in emerging markets and opening their doors to successful economic development.