Bribes and Firm Value
42 Pages Posted: 23 Nov 2012 Last revised: 8 Nov 2016
Date Written: November 1, 2016
I exploit the passage of the U.K. Bribery Act 2010 as a shock to U.K. firms’ cost of doing business. Around the Act’s passage, U.K. firms operating in high-corruption countries experience a drop in firm value, while their non-U.K. competitors in these countries encounter an increase. U.K. firms respond to the Act by reducing the expansion of their subsidiary network into perceptively corrupt countries. Moreover, their sales and merger and acquisition (M&A) activity in such countries declines. In sum, bribes facilitate doing business in certain countries. Imposing unilateral anti-bribery regulations on some firms benefits their unregulated competitors.
Keywords: valuation, corruption, regulation, corporate governance
JEL Classification: G30, G34, G38, K22
Suggested Citation: Suggested Citation