The Impact of Anti-Bribery Enforcement Actions on Targeted Firms

We use data from enforcement actions initiated under the U.S. Foreign Corrupt Practices Act (FCPA) to examine the hypothesis that managers engage in foreign bribery because it is profitable. We find that bribery is associated with projects that have positive ex ante net present value. Even net of costs and penalties, the average ex post NPV for bribe-related projects is non-negative for firms that are caught, and the reputational loss is negligible. For a subset of firms that face comingled charges for financial fraud, however, the direct cost and reputational loss are larger and the ex post NPV is negative.