Unsolicited Justice: the Institutional Externality of FCPA Enforcement on Corruption and Investment
This paper examines the impact of transnational ant-corruption legal regimes, represented by the U.S. Foreign Corrupt Practices Act (FCPA), on firms’ behavior and performance. I argue that external anti-bribery enforcement disrupts the informal quid pro quo in corrupt countries where firms offer bribes in exchange for market access and protection from expropriation. As a result of the legal intervention, firms subject to FCPA regulation are deterred from navigating predatory regulations using illegal means, and their investment performance suffers. Therefore, such companies decrease investments in markets with burdensome regulatory restrictions enforced by unconstrained government bureaucrats. Using an original dataset on the enforcement actions of the FCPA, I examine the law’s impact on multinational enterprises under its jurisdiction. I find that FCPA enforcement decreases the revenues and profitability of firms listed in U.S. stock markets, and the reductions are mostly found in high-barrier industries within countries lacking strong legal institutions. Results also show that FCPA intervention makes firms tied to U.S. markets more likely to sell fixed assets and reduce both short-and long-term investments in high-risk markets. The paper highlights the institutional spillover effects of domestic market regulations in an integrated globalized economy. Transnational law enforcement applies a country’s domestic law to foreign jurisdictions, which provides a form of institutional subsidy to countries with weak judicial systems to sanction local corruption.

Jian XU is a PhD Candidate in International Political Economy at Emory University. His research examines government-business relations, corruption, and the rule of law in both comparative and transnational contexts. He is particularly interested in studying the impact of transnational legal orders on the rent-seeking behavior of public and private actors. His research on how political connections affect commercial lawsuit outcomes in China is forthcoming in Comparative Political Studies. His coauthored work on the importance of political resources for MNCs’ litigation outcomes in authoritarian courts received the David A. Lake Award for the Best Paper Presented at the 2019 IPES Conference. He obtained a Bachelor of Management degree from Zhejiang University in China, and a Master’s degree in political science from Duke University.
Speaker(s) Mr Jian XU
PhD Candidate, Emory University
Date 18 Feb 2020 (Tuesday)
Time 11:00 am
Venue By zoom at the link:
Hong Kong University of Science and Technology
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