Ethical behavior of firms and corruption in the public sector – a cluster analysis of worldwide countries

Abstract

In countries where corruption is high, there is less incentive for corporate organizations to behave ethically. Ethics, either in the private and public sectors, can be related to the level of economic development, economic freedom, and the quality of governance. The objective of this paper is to analyze the relationship between corporate ethics and corruption in the public sector, to group countries according to these indicators, and investigate the characteristics of these clusters. A hierarchical followed by a K-means cluster analysis was performed to group 127 countries. Non-parametric and post-hoc tests were used to examine the significant differences among clusters in some features. The correlation between the ethical behavior of firms and corruption in the public sector was strong and significant. The cluster analysis led to three significantly different clusters, one formed by countries with high levels of corporate ethics and low corruption and it is composed only by countries with high-income, another with medium levels and finally a group of countries with low levels of corporate ethics and high levels of corruption. The results also suggest significant differences among the clusters in several economic, institutional, and development indicators. Improving these indicators potentially lead to high standards of ethics in the private and public sectors.