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The impact of foreign laws on U.S. firms: evidence from the U.K. Bribery Act

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  • Amanda Sanseverino

    (Manhattan College)

Abstract

In recent years, a number of countries have strengthened their anti-corruption laws. Some of these laws apply to foreign firms, including those based in the United States. Considering, however, that the US Foreign Corrupt Practices Act (FCPA) is regarded as the most powerful anti-corruption regime in the world, a key question arises: Do foreign anti-corruption laws affect US firms? Using US multinational firms’ differential exposure to the extraterritorial jurisdiction of the 2010 United Kingdom Bribery Act (UKBA), this study provides evidence suggesting that they do. Following the UKBA’s adoption, US firms subject to its jurisdiction curb their business in high-corruption-risk countries, relative to their unexposed US peers. This result is more pronounced for firms with greater bribery exposure and enforcement risk and passes a battery of placebo and robustness tests. These findings suggest that foreign anti-corruption laws produce incremental regulatory costs for US firms by raising the potential for multijurisdictional enforcement. As policymakers worldwide deliberate on approaches to reduce cross-border corruption, this evidence aligns with the view that enacting extraterritorial laws can enhance the effectiveness of anti-corruption regulation in the global economy.

Suggested Citation

  • Amanda Sanseverino, 2024. "The impact of foreign laws on U.S. firms: evidence from the U.K. Bribery Act," Review of Accounting Studies, Springer, vol. 29(4), pages 3369-3412, December.
    • Handle: RePEc:spr:reaccs:v:29:y:2024:i:4:d:10.1007_s11142-023-09783-8
    DOI: 10.1007/s11142-023-09783-8
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    Keywords

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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