The Relationship between Corruption, Corporate Governance, and Firm Financial Return atthe Provincial Level

Researchers have often examined corruption based on perceptual criteria and nationally. The innovation of this research was to take the two advantages of objective documentation and local dimensions in defining the corruption index. This study used a local and objective variable of corruption by comparing the sample data consisting of the selected companies of Tehran Stock Exchange (TSE) during the period of 2006-2013 in regions with high and low corruptions. Analysis of the financial return of firms at the regional level showed that the existence of corruption at the provincial level increased Return on Assets (ROA) and Tobin’s Q. This study also examined the relationship between corruption, corporate governance, and firm financial return by using the panel data method. The results revealed the positive effect of corruption on the firm’s ROA and Tobin’s Q, while board independence and ownership concentration did not have a significant relationship with ROA and Tobin’s Q.