Geographic Clustering of Corruption in the U.S.
51 Pages Posted: 7 Jun 2017 Last revised: 12 May 2020
Date Written: April 20, 2018
We test the hypothesis that U.S. corporations headquartered in states with greater public corruption are also prone to more unethical behavior when operating abroad. We exploit passage of Foreign Corrupt Practices Act (FCPA) that curtailed bribery of foreign officials and find firms in corrupt states, especially those exporting to more corrupt countries, suffer greater performance decline following FCPA, suggesting larger loss from anticipated bribery restrictions. Controlling for industry, firms in corrupt states are more likely to be targets of FCPA enforcement actions. They are also more likely to have paid foreign bribes, as disclosed during pre-FCPA investigations.
Keywords: Corruption, Corporate Governance, Social Norms, Culture of Corruption
JEL Classification: D73, G34, Z10
Suggested Citation: Suggested Citation