Corruption and financial performance of private and public firms

Although until 1980s scientific research on corruption was largely limited to the fields of sociology and criminal law, starting from that moment, there has been an increase in studies on the relationship between corruption and economic performance, with respect to both public and private sectors. In the public sector, corruption is supposed to reduce the efficiency of public services, to jeopardize citizens’ trust in institutions and to increase in transaction costs. In this framework, corruption, acting as a negative externalities, creates a situation in which the market fails, to allocate resources efficiently. With regard to the private sector, corruption has a relevant effect on the size of the informal economy, increasing the costs of creating new businesses and surviving in the market within the formal economy. Hence, higher costs are connected to a deterioration of the firms’ financial position and expose them to higher default risks. Lower firms’ performances and a decrease in the levels of governance effectiveness weaken financial institutions, amplifying the effect of local crises in an interconnected and globalised financial markets. According to these recent developments in Law and Economics literature, this double special issue of international Journal of Monetary Economics and Finance (IJMEF) includes nine papers about the relationship between corruption and economic performance in private or public sectors. Hence the special issue develops along two separate, but complementary guidelines, analysing the relationship between corruption and economic and financial performances on both micro and macro perspectives. Finally, two papers extend the concept of corruption to the economy of crime.