Information Availability and Security in Foreign Corrupt Practices Act Investigations

Abstract

Foreign Corrupt Practices Act (FCPA) deals with businesses found guilty of bribing foreign officials. The increasing number of cases and high financial penalties present a growing concern for businesses operating or planning to start operating abroad. The ratings of Transparency International offer an indicator of corruption in countries; however, the analysis shows that this indicator is not correlated with the occurrence of FCPA cases in a particular country. This article proposes that the level of availability and security of information is more important in predicting and potentially preventing the need for FCPA investigations. Using the data of cases filed in 2016–2017, the article discusses how the factors of information availability and security influence the likelihood of FCPA investigation in a country. The article contributes to empirical studies on corruption by focusing on fact-based data on corruption as opposed to perception-based data and shows that these two sets of data do not correlate. The positive correlation between the availability of information and the number of FCPA cases especially in the countries with low GDP suggests that companies can leverage from the availability of information to take action against bribery before it is investigated.