Transformations  in
Business & Economics

DETECTING INFORMAL COSTS IN VIETNAMESE FIRMS: A DATA MINING APPLICATION⁷
Thi Kim Nguyen, Cheng-Po Lai, Hoai Vu Phan, Thi-Kim-Tuyen Nguyen

ABSTRACT: Informal cost, a long-standing issue, refers to the bribes paid to expedite business operations and gain a competitive advantage. While it may initially facilitate smoother transactions, long-term reliance on informal cost can lead to complacency and hinder progress. Widespread prevalence of informal cost within a society can stifle innovation and competition, resulting in a sluggish economy. Detecting informal costs aids independent auditors in enhancing the quality of their audits and assists governments in implementing preventive and corrective measures. This study employs effective Data Mining techniques like Decision Trees (DT), Support Vector Machine (SVM), and Artificial Neural Networks (ANN) to identify informal costs in Vietnamese firms. Three models, evaluating factors such as industry, business location, firm size, ownership, age, gender of top managers, international certification, export activities, and involvement of external auditors, are compared to gauge their effectiveness. This research is considered one of the pioneering studies on corruption costs at the firm level.

KEYWORDS:  informal costs, data mining, Decision Trees, Support Vector Machine, Artificial Neural Networks.

JEL classification:  G17, G41.

⁷Acknowledgments:  Disclosure statement. Authors declare that they do not have any competing financial, professional, or personal interests from other parties.