Does Corruption Have a Gendered Effect on Firm Performance?

The effect of governance on small firm performance is of growing interest to entrepreneurs and policymakers. Corruption is an informal yet often deeply embedded component of governance, and it can exert effects on risk and cost structure which may ultimately shape firm performance. This is especially salient for small firms, which have limited resources to absorb the impact of corruption, and for women-managed firms, because women process and are influenced differently by risk. We thus investigate if corruption has gendered implications for the performance of small firms managed by women. To address this largely unstudied question, we ask how corruption affects the performance of female-managed small firms, both through direct effects and through interaction effects. We conduct our analysis using a multi-level dataset comprising 13,143 firms in 120 countries, representing a wide range of governance environments across developed and developing countries. We use total factor productivity and job creation as two measures of small firm performance, and we also control for other firm- and country-level factors, including age, size, industry, and country regulatory and economic development conditions. Our multi-level analysis uses a cross section pooled OLS regression with robust standard errors, clustered by country, and time dummies. Our preliminary results indicate that the direct effect of corruption is always negative and significant for both total factor productivity and job creation in female-managed small firms, and that a negative gendered effect of corruption exists for total factor productivity but not for job creation.