Foreign Bribery: Incentives and Enforcement

71 Pages Posted: 22 Mar 2010 Last revised: 9 Apr 2017

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

Date Written: April 7, 2017

Abstract

We use data from enforcement actions initiated under the U.S. Foreign Corrupt Practices Act (FCPA) to examine firms’ incentives to pay bribes and their costs when they are caught. Bribery is associated with projects that are valuable even considering the expected penalties. For firms that are caught, the average ex post NPV net of penalties is still non-negative 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 large and the ex post NPV is negative.

Keywords: Bribery, FCPA, penalties, financial misrepresentation, fraud

JEL Classification: G38, K22, K42, L51, M41

Suggested Citation

Karpoff, Jonathan M. and Lee, D. Scott and Martin, Gerald S., Foreign Bribery: Incentives and Enforcement (April 7, 2017). Available at SSRN: https://ssrn.com/abstract=1573222 or http://dx.doi.org/10.2139/ssrn.1573222

Jonathan M. Karpoff (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States
206-685-4954 (Phone)
206-221-6856 (Fax)

D. Scott Lee

University of Nevada, Las Vegas - Lee Business School ( email )

4505 S. Maryland Parkway
Box 456008
Las Vegas, NV 89154-6008
United States
702-895-2526 (Phone)
702-895-4630 (Fax)

HOME PAGE: http://faculty.unlv.edu/slee

Gerald S. Martin

American University - Kogod School of Business ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States
202-885-3914 (Phone)

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