Policeman for the World: U.S. Enforcement of Foreign Corruption Regulation and Corporate Investment Policies

70 Pages Posted: 1 Apr 2019 Last revised: 6 Sep 2019

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: September 5, 2019

Abstract

We examine the impact of US enforcement of the Foreign Corrupt Practices Act (FCPA) on firms’ investment policies. Following a sharp increase in FCPA prosecutions in the mid-2000s, particularly for violations of the Act’s recordkeeping provision, both US and non-US companies under US jurisdiction headquartered in countries that agree to increase cooperation with US regulators (“FCPA” firms) reduce direct investment in corrupt countries; there is no evidence that non-FCPA firms offset this reduction. Consistent with the FCPA imposing significant recordkeeping-related compliance costs, following the enforcement increase, FCPA firms significantly strengthen their internal anti-bribery controls when investing in a corrupt country.

Keywords: Foreign Corruption Regulation; 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: U.S. Enforcement of Foreign Corruption Regulation and Corporate Investment Policies (September 5, 2019). 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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