IMPACT OF CORRUPTION ON FIRMS’ PERFORMANCE IN PAKISTAN: EVIDENCE FROM WORLD BANK’S ENTERPRISE SURVEY DATA

Corruption has been damaging Pakistan. Transparency International every year published Corruption Perception Index which measures the level of corruption perception in countries. In 2020, Pakistan was ranked at 124 among 179 countries whereas in 1995, Pakistan was observed to be the second most corrupt country. The Global Competitiveness reports (2016-17 & 2017-18) released by World Economic Forum have also declared ‘corruption' as the most problematic factor of doing business in Pakistan. Corruption increases the direct costs of firms through bribery. It encourages the bureaucratic red-tapism and corrupts the institutions of contract enforcement and property rights protection. With this background, the aim of the paper is to deliver the evidence on the impact of corruption on firms' performance. Nature of the research is quantitative and the time horizon for the research is cross-sectional while the data have been taken from World Bank Enterprise Survey 2013 comprising the sample of 1247 firms. The findings reveal that the biggest obstacle in doing business in Pakistan is the shortfall of electricity while the second most severe obstacle is corruption. The impact of corruption on firms' performance have further been examined. Through analysis, it has been examined that corruption has its negative impact on firms' performance. Therefore, there is a strong need to tackle the incidence of corruption as it has been badly affecting the firms' performance in Pakistan. The findings of this study have clear implications for both firms and policymakers