The Impact of Foreign Laws on U.S. Firms: Evidence from the U.K. Bribery Act

Abstract

In recent years, a number of countries have strengthened their anti-corruption laws. Some of these laws apply to foreign firms, including those based in the United States. Considering, however, that the US Foreign Corrupt Practices Act (FCPA) is regarded as the most powerful anti-corruption regime in the world, a key question arises: Do foreign anti-corruption laws affect US firms? Using US multinational firms’ differential exposure to the extraterritorial jurisdiction of the 2010 United Kingdom Bribery Act (UKBA), this study provides evidence suggesting that they do. Following the UKBA's adoption, US firms subject to its jurisdiction curb their business in high-corruption-risk countries, relative to their unexposed US peers. This result is more pronounced for firms with greater bribery exposure and enforcement risk and passes a battery of placebo and robustness tests. These findings suggest that foreign anti-corruption laws produce incremental regulatory costs for US firms by raising the potential for multijurisdictional enforcement. As policymakers worldwide deliberate on approaches to reduce cross-border corruption, this evidence aligns with the view that enacting extraterritorial laws can enhance the effectiveness of anti-corruption regulation in a global economy.

Keywords: Anti-Corruption Laws, Bribery, Corruption, Extraterritoriality, Multinational Firms, Regulatory Globalization

JEL Classification: F23, F60, K20, K33, K40, L51, M14, M41