The Effect of Corruption on Firm’s Performance: Case of Tajikistan

Abstract

Corruption is among the list of obstacles for businesses in Tajikistan, and hence the area of study of current paper is to assess the impact of corruption on firm performance, particularly firms in retail, manufacturing and other sectors. The aim is to study if paying informal gifts to court, tax and tax collection, customs and imports have negative or positive affect on the total annual sales under the named sectors. It is also interesting, if corruption in Tajikistan has the effect of ‘greasing the wheels’ or is it ‘sand in the wheels’ based on the results of studies of background literature. According to the result of regression of current paper, the effect of corruption on retail, manufacturing and other sectors differs by sectors and by type of informal payments. For instant, in retail sector to pay informal payments in general has negative impact, where paying informal payment to customs has positive and statistically significant affect. For manufacturing sector, paying informal payments to deal with court has negative impact on total annual sales of firm in the sector, whereas for other sectors, paying informal payments to tax and tax collection has negative impact on total annual sales. In both cases the coefficient is statistically significant. Hence the paper concludes that, even if corruption has positive impact on some sectors, still it should be continued to fight and new ways and methods for fighting corruption should be put into practice.