Corruption Controls in MNCs and Financial Benefits from Foreign Bribery in Forty-Four Host Countries

Abstract

While corruption is a widely studied phenomenon, little is known about the conditions under which it can be controlled in multinational companies (MNCs). This paper probes the deeper structure of corruption, i.e. the financial opportunity to engage in it. More specifically, we examine how the financial benefits of corruption opportunity (BCO) varies with the enactment of various internal and external corporate corruption controls. To avoid biases associated with perceptual measures of corruption, we study real life bribery transactions based on a sample of publicly traded MNCs caught for violations of the United States Foreign Corrupt Practice Act (FCPA). Findings from forty-four host countries reveal that a) regulatory sanctioning in host countries, and bureaucratic controls at a firm level are negatively related to BCO, b) positive social sanctioning is positively related to BCO, and b) vigilance controls help strengthen negative effect of bureaucratic control and positive social sanctioning control on BCO. This study represents a first known attempt to empirically examine the impact of corruption controls on financial benefits of corruption and advances understanding of the multidimensionality of corporate corruption control in MNCs. Keywords: corporate corruption, corruption control, vigilance control, foreign bribery