Who Benefits from Anti-Corruption Enforcement?

Abstract

We exploit enforcement actions for violations of the U.S. Foreign Corrupt Practices Act in non-OECD countries to study the effect of anti-bribery enforcement on unpunished firms. Firms in the same country-industry as the violator experience significant increases in revenue (+6.4%) and asset productivity (+4.2%). This result is driven by foreign-owned business group affiliates and amplified when affiliates are active in government-dependent industries, members of groups with limited corruption experience, and owned by productive parents. Overall, anti-bribery enforcement actions, which also reduce local corruption levels, result in reallocation of economic activity and level a playing field disrupted by corruption.

Keywords: business groups, competition, corruption, firm growth, Foreign Corrupt Practices Act

JEL Classification: G30, G38, K22