The Value of Foreign Bribery to Bribe Paying Firms
Jonathan M. Karpoff
University of Washington - Michael G. Foster School of Business
D. Scott Lee
University of Nevada, Las Vegas - Lee Business School
Gerald S. Martin
American University - Kogod School of Business
June 16, 2015
We use data from enforcement actions initiated under the U.S. Foreign Corrupt Practices Act (FCPA) to examine the hypothesis that managers engage in foreign bribery because it is profitable. We find that bribery is associated with projects that have positive ex ante net present value. Even net of costs and penalties, the average ex post NPV for bribe-related projects is non-negative for firms that are caught, and the reputational loss is negligible. For a subset of firms that face comingled charges for financial fraud, however, the direct cost and reputational loss are larger and the ex post NPV is negative.
Number of Pages in PDF File: 58
Keywords: Bribery, FCPA, penalties, financial misrepresentation, fraud
JEL Classification: G38, K22, K42, L51, M41
Date posted: March 22, 2010 ; Last revised: June 20, 2015
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