Policeman for the World: The Rise in Extraterritorial FCPA Enforcement and Foreign Investment

81 Pages Posted: 1 Apr 2019 Last revised: 20 Feb 2020

See all articles by Hans Bonde Christensen

Hans Bonde Christensen

University of Chicago - Booth School of Business

Mark G. Maffett

University of Chicago - Booth School of Business

Thomas Rauter

University of Chicago - Booth School of Business

Date Written: February 19, 2020

Abstract

Using insights gained from Foreign Corrupt Practices Act (FCPA) enforcement actions against corporations from 1977 to 2017, we show that a mid-2000s increase in US extraterritorial FCPA enforcement, characterized by international cooperation and prosecutions based on the FCPA’s recordkeeping provisions, has a significant deterrent effect on foreign direct investment by non-US firms in high-corruption-risk countries. Regulatory compliance costs appear to play a role in deterring investment. Our evidence suggests that extraterritorial FCPA enforcement significantly affects the investment policies of non-US firms under US jurisdiction, thereby limiting the FCPA’s anticompetitive impact on US firms relative to firms from other developed countries.

Keywords: Foreign Corruption Regulation; Extraterritorial Enforcement; Foreign Corrupt Practices Act (FCPA); Foreign Direct Investment; Mergers and Acquisitions; Internal Controls

JEL Classification: F50; F60; K2; M4; O1

Suggested Citation

Christensen, Hans Bonde and Maffett, Mark G. and Rauter, Thomas, Policeman for the World: The Rise in Extraterritorial FCPA Enforcement and Foreign Investment (February 19, 2020). Available at SSRN: https://ssrn.com/abstract=3349272 or http://dx.doi.org/10.2139/ssrn.3349272

Hans Bonde Christensen

University of Chicago - Booth School of Business ( email )

5807 South Woodlawn Avenue
Chicago, IL 60637
United States

Mark G. Maffett (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Thomas Rauter

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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