Who Benefits from Anti-Corruption Enforcement?

Abstract

We exploit 88 enforcement actions for violations of the US Foreign Corrupt Practices Act in non-OECD countries to study the effect of anti-bribery enforcement on unpunished firms. After anti-bribery enforcement actions take effect, firms in the same country-industry as the violator experience significant increases in revenues (+6.4%) and asset productivity (+4.2%). This result is driven by foreign-owned business group affiliates and amplified when affiliates are (i) active in government-dependent industries, (ii) members of groups with limited corruption experience, and (iii) owned by productive parents. Together with evidence that enforcement actions reduce corruption levels in host countries, our findings support the view that anti-bribery actions result in reallocation of economic activity and level a playing field roughened up by corruption.

Keywords: corruption, law and finance, business groups, firm growth, competition

JEL Classification: G30, G38, K22