Impact of Corruption and Political Instability on Firm Performance in the Kyrgyz Republic

Abstract

This thesis work analyzes the impact of corruption and political instability on firm performance in the Kyrgyz Republic. For the last several years these two phenomena have become an issue of concern not only for the economy and population in general but also for the private sector as well. There are two points of view regarding the implications of corruption on growth. The first theory suggests that corruption has a deteriorating effect on growth, i.e. it “sands the wheel”. The second theory implies that there is a positive relationship between corruption and growth, i.e. corruption “grease the wheel”. The World Bank Enterprise Survey conducted in 2009, 2013, and 2019 is used for empirical research. The fixed effects estimation method is used. The findings show that corruption in the form of bribe payments, as well as political instability, have a significant negative effect on the firm performance measured by the annual sales growth. Thus, corruption has a harmful effect on the firm performance, which confirms the theory of “sanding the wheel”.