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“Unsolicited Justice: The Institutional Externality of FCPA Enforcement” by Jian Xu

November 11, 2020 @ 9:00 am 10:00 am JST

Authors: Jian Xu (Emory)

Abstract: Scholars have examined how transnational anti-corruption legal regimes impact cross-border business activities. I turn the attention to how such transnational enforcement affects the local firms and competitive landscapes in the targeted countries. I argue that transnational enforcement deters bribery behavior of firms under its jurisdiction, which nevertheless creates more market opportunities for firms not constrained by anti-bribery obligations. Using an original dataset of the enforcement actions of the U.S. Foreign Corrupt Practices Act (FCPA), I find that FCPA enforcement decreases corrupt payments made by local firms listed in the U.S. who operate in highly regulated industries under weak judicial systems. I show that external legal interventions help unregulated firms gain competitive advantages in corruption-prone environments, while forcing regulated firms to reduce their exposure to high political risks.

Discussants: TBD.

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