Publications
Publications
- Forthcoming
- Management Science
The Political Economy of Anti-Bribery Enforcement
By: Lauren Cohen and Bo Li
Abstract
Using exogenous variation in the timing and geographic location of U.S. Congressional elections, we find that the probability of Foreign Corrupt Practices Act (FCPA) enforcement actions against foreign firms increases significantly preceding senatorial elections, spiking over 21%, with no commensurate increase for globally-operating domestically-headquartered firms in these same senators’ states. Using hand-collected case-level data from the SEC and DOJ, we observe that these pre-election cases tend to be weaker overall and that they are brought significantly more often against foreign firms that operate in less-important industries in the senator’s state, and when they have a smaller overall US presence. This spike in foreign firm targeting is accompanied by a significant spike in traditional and social media coverage coupled with sharply negative sentiment. Furthermore, these enforcement actions and media spikes are associated with electoral consequences, specifically greater vote shares and better poll results for enforcement-state senators. The FCPA enforcement actions have real impacts on firms. These include a 10% reduction in market value after enforcement actions against foreign firms and a significant decrease in credit ratings.
Keywords
Bribery; Regulatory Enforcement; Crime and Corruption; Political Elections; Power and Influence; Public Opinion; Geographic Location
Citation
Cohen, Lauren, and Bo Li. "The Political Economy of Anti-Bribery Enforcement." Management Science (forthcoming).