The Value of Foreign Bribery to Bribe Paying Firms

58 Pages Posted: 22 Mar 2010 Last revised: 20 Jun 2015

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: June 16, 2015

Abstract

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.

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., The Value of Foreign Bribery to Bribe Paying Firms (June 16, 2015). 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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