A Study of the Impact of Executive Corruption on Corporate Innovation

Abstract

Both executive corruption and corporate innovation are important factors affecting corporate development. This paper explores the impact of executive corruption on corporate innovation and examines the mechanism of their effects from the perspective of financing constraints. It is found that executive corruption significantly inhibits corporate innovation in general. In addition, financing constraints act as a mediator between executive corruption and corporate innovation, i.e., executive corruption exacerbates the financing constraints faced by firms and affects the access to and allocation of corporate resources, thus leading to a decrease in corporate innovation inputs and outputs. Further, the inhibitory effect of executive corruption on firm innovation is more pronounced in firms with low quality internal controls, strong professional background of executives, low quality external audit, low shareholding of institutional investors, strong political affiliation, and state-owned enterprises.