The Political Economy of Anti-Bribery Enforcement

Format:Print
| Language:English

Abstract

This paper documents novel evidence on the influence of political incentives in the regulatory enforcement of foreign bribery. Using exogenous variation in the timing and geographic location of U.S. Congressional elections, we find that the probability of a Foreign Corrupt Practices Act (FCPA) enforcement action against foreign firms located in the Senator’s jurisdiction increases significantly pre-election, spiking 23%, with zero equivalent move for equivalently global (but domestic-headquartered) firms in the Senator’s jurisdiction. Using hand-collected case-level data from the U.S. SEC and DOJ, we also observe larger discretion in regions where foreign firms are larger global competitors of in-state firms, operate in locally important industries, and when Senators serve as the Chairman of the Senate Judiciary Committee (which oversees the DOJ). Anti-bribery enforcement has electoral implications, leading to spikes in media coverage of the FCPA enforcement coupled with greater vote shares for the Senator. Moreover, the cases pushed through against these foreign firms just prior to elections appear to be weaker cases. The enforcements result in real effects, as in response to strategic timing in enforcement, firms reallocate business segments and sales.