Abstract
Corporation corruption is an issue that remains at the forefront of regulatory policy. This column examines the persistence of corruption among a sample of privately held firms from 12 Central and Eastern European countries.
Creating a proxy for corporate corruption based on a firm's internal inefficiency, it is suggested that corruption can enhance a firm's overall profitability. A channel analysis reveals that inflating staff costs is the most common approach by which firms divert funds to finance corruption.
Corruption may persist simply because of its ability to improve a firm's return on assets.