Anti-Corruption Laws and Geographic Reporting Transparency

52 Pages Posted: 8 Nov 2022 Last revised: 30 Mar 2023

See all articles by Donal Byard

Donal Byard

City University of New York (CUNY) - Stan Ross Department of Accountancy

Heemin Lee

Stan Ross Department of Accountancy, Zicklin School of Business, Baruch College, City University of New York

Edward Xuejun Li

City University of New York (CUNY) - Stan Ross Department of Accountancy

Amanda Sanseverino

Manhattan College

Date Written: March 30, 2023

Abstract

This study analyzes the effects of increased exposure to anti-corruption laws on firms’ geographic reporting transparency with respect to their perceived corruption exposure (“corruption transparency”). Using the 2010 adoption of the U.K. Bribery Act (UKBA) and its significant extraterritorial reach for identification, we conduct a difference-in-differences analysis comparing changes in corruption transparency for U.S. multinational firms with and without UKBA exposure. We find that, relative to comparison firms, UKBA-exposed firms have a significant decrease in corruption transparency. We develop a method to separate the effects of firms’ disaggregation choices from those of changes in their revenue mix across existing reported geographic areas. Our results suggest that this decrease in corruption transparency can be traced to exposed firms (1) actively shifting reported revenues into more opaque regions and (2) passively resisting splitting up more opaque regions when such regions experience stronger revenue growth. Overall, our evidence suggests that anti-corruption laws incentivize firms to exploit their considerable discretion under ASC 280 to camouflage their perceived corruption exposure.

Keywords: Geographic reporting, corruption, U.K. Bribery Act, reporting incentives

JEL Classification: F23; F60; K20; M40

Suggested Citation

Byard, Donal and Lee, Heemin and Li, Edward Xuejun and Sanseverino, Amanda, Anti-Corruption Laws and Geographic Reporting Transparency (March 30, 2023). Available at SSRN: https://ssrn.com/abstract=4266130 or http://dx.doi.org/10.2139/ssrn.4266130

Donal Byard

City University of New York (CUNY) - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
646-312-3187 (Phone)
646-312-3161 (Fax)

Heemin Lee

Stan Ross Department of Accountancy, Zicklin School of Business, Baruch College, City University of New York ( email )

55 Lexington Ave
New York, NY 10010
United States
6463123164 (Phone)

Edward Xuejun Li (Contact Author)

City University of New York (CUNY) - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
646-312-3235 (Phone)

Amanda Sanseverino

Manhattan College ( email )

Manhattan College Parkway
Riverdale, NY 10471
United States

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