Investigators:  Meghana Ayyagari, Thomas A. Loughran, Sally S. Simpson, Vojislav Maksimovic

Description:  Using recent data from the World Bank Business Environment and Enterprise Performance Survey, which is comprised of firm-level observations from multiple countries and industries, this paper develops and tests three competing hypotheses concerning the relationship between corporate actors’ perceptions of procedural justice and these two illicit behaviors. First, those actors who perceive higher levels of procedural justice should be involved in neither of the illicit activities, i.e., we might expect to find a negative relationship between these constructs and each of the outcomes. Second, it could be that relationships between procedural justice perceptions and offending are situation specific such that negative experiences in one regulatory realm do not translate to another.  Therefore, we might anticipate an increased risk of bribery and graft when firm interactions with regulators/inspectors violate notions of procedural justice (e.g., obstacles to business operation) but would not expect a concomitant increase in tax noncompliance.  Similarly, we would expect difficulties with tax authorities to translate into noncompliance but not participation in graft and corruption.  Third, is the ‘bad citizens’ hypothesis, where we might expect to see no relationship between procedural justice perceptions and either type of behavior, as such behavior is merely perpetrated by specific actors (population heterogeneity). Finally, throughout the analysis, we account for the role of variability in perceptions across both countries and industries.

Presentation:  Law & Society Annual Meeting, 2012