The Impact of Anti-Corruption Laws: Evidence from the U.K. Bribery Act’s Extraterritorial Reach

Abstract

I study the impact of foreign anti-corruption laws using a setting that exploits US multinational firms' differential exposure to the extraterritorial jurisdiction of the 2010 United Kingdom Bribery Act (UKBA). Results suggest that adoption of the UKBA, which raised public litigation costs associated with foreign bribery, induces US firms subject to its jurisdiction to curb their business exposure to countries with high corruption risk, relative to their unexposed US peers. The effect is more pronounced for firms with greater enforcement risk and bribery exposure, and is robust to a battery of placebo and additional analyses. This study is the first to provide empirical evidence of the impact of foreign anti-corruption laws on US firms, which are already subject to the US Foreign Corrupt Practices Act. This evidence supports extraterritoriality as a critical element of effective anti-corruption laws and highlights its important role in regulating multinational firms in the globalized economy.