The impact of government integrity and culture on corporate leadership practices: Evidence from the field and the laboratory

Abstract

To understand what drives corporate leaders to choose certain corporate governance practices there is need to look beyond the individual traits of the leader, examining the effect of the elements of the institutional environment on managerial decisions. Drawing on the contextual approach to leadership and insights from institutional theory, this study examines the impact of government integrity on corporate governance practices. From the field study, we find that government integrity has a positive causal effect on corporate leaders' corporate governance decisions and choices. The positive impact of government integrity on corporate leaders' actions is also confirmed using a laboratory study, showing that a social norm of promoting leadership integrity, positively impacts on corporate responsibility especially in contexts where the government lacks credibility. Specifically, we find that corruption and bribery by corporate leaders is low in contexts that are transparent and high in contexts with low government integrity.