Foreign Corruption Research Articles

Sorting out the aid–corruption nexus

AbstractWe employ matching methods to explore the relationships between foreign aid flows and corruption in recipient countries. Data are drawn from recipients of foreign aid for the 1996–2013 period. We find no compelling evidence of an effect running from corruption to aid flows. Furthermore, point estimates imply that corruption reforms lead countries to receive less aid. Alternatively, we generally find that, over a 10-year horizon, a sustained increase in aid leads to more corruption in a recipient. It is the sustained nature of an aid increase that seems to be important for this effect. (We generally do not report significant results for large changes in aid that are not sustained over time.)

Foreign Direct Investment and corruption paradigm impacts: a panel data study

Foreign direct investment (FDI) is the overriding key in the advance and growth of any economy. In this paper, using unbalanced panel data and OLS regression, we first probe the effect of corruption on FDI in the host less corrupt country (LCC) and the host more corrupt country (MCC). Secondly, we investigate the impact of corruption difference (between home and host countries) on FDI in both categories (LCC, MCC). We test the model of big sample of countries that diverge in their level of corruption. To confirm the validity of this study, a multiplicity model of specifications and estimation strategies is investigated to endow with robustness. However, the consequence of corruption difference found negative and consider it as grabbing hand in full sample and in MCC. This study reveals that the overall effect of corruption is positive and found it as helping hand.

Foreign direct investment, corruption, and institutional reforms

Corruption impacts the competitive conditions among firms and the flow of foreign investment. Institutional reforms made for fighting against corruption are sometimes useless. We develop a model in which a corrupted government tries to set an optimal institutional level taking into account the cost of this policy on foreign investment, the benefit of a corrupted domestic firm and the benefit of local citizens. A political contribution is made by a corrupted lobby group in order to benefit from a lower institutional level. Our results suggest that the optimal institutional level depends on the degree of efficiency of firms and the level of corruption of the host government.

Does a nonlinear specification methodology better capture the link between host country corruption levels and inward foreign direct investments A study of 92 countries

This paper investigates the link between inward foreign direct investment flows and host country corruption levels using annual data for developed, developing and transitional countries, over the 2002-2015 period. We find that the nonlinear specification provides a better characterisation of the relationship between corruption and inward FDI flows. Furthermore, we find that this relationship is a function of the development status of the host country. Finally, the marginal impact of corruption levels on FDI seems to be statistically significant at a higher level when a nonlinear (as opposed to a linear) specification is used.

Foreign direct investment and corruption paradigm impacts: a panel data study

Foreign direct investment and corruption paradigm impacts: a panel data study

“Believe Me,” We Do Not Have a Foreign Emoluments Clause Violation

"Believe Me," We Do Not Have a Foreign Emoluments Clause Violation Scotty Nicole Teal Introduction An increasingly globalized world has brought a stronger need to protect the U.S. government from foreign corruption.1 With the 2016 election of President Donald Trump, this need has only expanded.2 Having elected a billionaire, reality star, real estate mogul, and international business owner3 as the leader of a world super power, the U.S. government can be vulnerable to negative foreign influence. The Framers of the constitution sought to protect the government from this type of problem by adding the Foreign Emoluments clause (Emoluments Clause) to the Constitution in 1787.4 President Trump was sued in New York District Court for allegedly violating the Foreign Emoluments Clause.5 In its brief, the Citizens for Responsibility and Ethics in Washington (CREW)6 alleged that the [End Page 717] president's international businesses and real estate holdings positioned him to receive money from foreign governments.7 These business interests, or entanglements, could "sway"8 or create an opportunity for negative foreign influence in violation of the Emoluments Clause.9 CREW states that these "entanglements between American officials and foreign powers could pose a creeping, insidious threat to the Republic."10 CREW argued that President Trump violated the Emoluments Clause because the clause "cover[s] anything of value, monetary or nonmonetary."11 In defense of the president, the Department of Justice (DOJ) contended that the president had not received illegal emoluments because an Emoluments Clause violation occurs only when the president receives compensation or gifts from a foreign country because of his official duty as president.12 Neither of these emoluments definitions gets at the core of an Emoluments Clause violation. The Emoluments Clause, intended to prevent negative foreign influence in a globalizing world, acts as a builtin protection. It was created by the Framers to avoid the negative impact that foreign wealth could have on the U.S. government. This article argues that while foreign corruption in the form of payments to the president might be exactly what the Framers originally intended to avoid, President Trump is not violating the Emoluments Clause; President Trump's interests both domestically and globally that increase his wealth are not a violation of the clause. This article argues that because the world has become more globalized, any Emoluments Clause violation should occur only if there is a real possibility that the president will actually be influenced and engage in political action based on the potential for financial windfall. Thus, would a reasonable president in this situation actually be influenced to act in favor of foreign powers? Part II of this article explains the CREW case and the competing definitions of emoluments. Part III addresses the functionalist and [End Page 718] formalist approaches to constitutional interpretation and ultimately advocates for a functional approach to the Foreign Emoluments Clause.13 Part IV examines the clause's text and emoluments' meaning in a global world. Part V explores the Foreign Emoluments Clause's original intent. Part VI discusses the Supreme Court's interpretation of the clause. Part VII discusses past practices regarding the executive branch's interpretation. Finally, Part VIII discusses the clause's future implications and possible remedies. Citizens for Responsibility and Ethics, et al. v. Trump The U.S. people elected Donald J. Trump as president in 2016.14 Immediately, articles surfaced about possible Emoluments Clause violations.15 This culminated in a suit by CREW that alleged President Trump's personal ownership of the Trump Organization, including its interests in the united states and in twenty foreign countries, is a violation of that clause because ownership involves President Trump receiving money from foreign governments.16 In its complaint, CREW explained that President Trump "personally benefits from business dealings, and Defendant is and will be enriched by any business in which they engage with foreign governments and officials."17 First, because President Trump owns a massive business empire comprising of hotels, buildings, restaurants, and other real estate, he has daily opportunities to do business with foreign officials.18 Although the president has placed this organization in a trust, he still has universal access to...

Kleptocracy and foreign corruption manifesting in illicit financial flows

PurposeThe purpose of this paper is to identify the place of kleptocracy and foreign corruption within the broader framework of financial crime. This facilitates understanding the importance of kleptocracy and foreign corruption as social problems. Two other aims are to better understand the most problematic components of a kleptocratic network and the most effective combatants of that network. A subsequent goal is to offer solutions from a broad range of interventions, including policy, technology, education, research and collaborative efforts.Design/methodology/approachTheoretical economic concepts are used to analyze the importance of kleptocracy and foreign corruption. A small in-depth survey of 15 experts is conducted to identify the most problematic components of kleptocratic networks and the most effective combatants of those networks. The proposed solutions are based on a combination of argumentation, econometric developments, application of trends in related fields and material from in-depth surveys.FindingsThis paper identifies kleptocracy and foreign corruption as one of the most, if not the most, devastating financial crime according to its impact on the total marginal utility of wealth. Experts identify foreign kleptocrats or corrupt foreign government officials as the most problematic entities in kleptocratic networks and the most effective combatant is identified as the US Department of Justice. By adding up fines and asset forfeiture related to corruption, penalties are found to be a small fraction of the problem in terms of monetary magnitude.Research limitations/implicationsThe paper does not attempt to make causal claims because of the nature of the paper’s purpose and methodology.Practical implicationsThe paper offers suggestions and methods for academic researchers who may wish to pursue a research agenda that is empirical and forensic with the aim of combatting kleptocracy and foreign corruption. The paper describes how information on kleptocracy and foreign corruption can be implemented into business and economics curriculum.Social implicationsKleptocracy and foreign corruption are important problems, and creative solutions are desperately needed.Originality/valueThe paper shows how understanding and combatting kleptocracy and foreign corruption can be considered an interdisciplinary activity, touching on fields including technology, economics, business, ethics, education, law, policy, statistics and research methods.

Foreign Direct Investment Regulation, Business Taxes, and Corruption: Cross-Country Study of Foreign Bank Presence

In this study, I investigate the impact of legal determinants on the presence of foreign banks. Using a panel dataset of 44 countries for the 2005–2012 period, I find that host countries attract more foreign banks when regulatory restrictions on foreign direct investment are low, when the compliance cost for paying taxes is low, and when host-country governments are less corrupt. I apply a robustness check to confirm the results. Overall, the evidence highlights the importance of government efforts to create a more favorable foreign direct investment environment by reducing restrictions and, along with those, costs associated with foreign capital investments.

Foreign Corruption: Differentiating Illegal Acts from Legal Acts

While it is seemingly straightforward to determine whether an action is corrupt or not, under the common definitions of corruption, determining its illegality is a very complex analysis. Because companies are generally not given full disclosure of what constitutes illegal corruption, they fear that all corruption illegal, and therefore do not want to jeopardize themselves or the company by disclosing to anyone, including their lawyers, any which may be seen as illegally corrupt.In this paper we will look at what is considered illegal under the laws of Canada and the USA, including defences available to charges of corruption, as well as the relationship between corruption and lobbying, and make some comparison with the developments in the transnational law arena, particularly related to decision of international arbitration tribunals.

Analysis of youth unemployment in Sub-Saharan Africa: determinants and possible ways forward

This paper investigates the causes of youth unemployment in Sub-Saharan Africa (SSA) during the period 1991-2012. The study used panel data method for a sample of 30 SSA countries; and it focused on the impact of economic, demographic and institutional factors as well as natural resources. We examine the determinants of youth unemployment for both the aggregate and gendered levels. The empirical results show that GDP growth, trade openness, foreign direct investment, education and corruption have negative and significant effect on total, male and female youth unemployment. The results also show that for both the aggregate and gendered levels of youth unemployment in SSA, the impact of natural resources is found to be positive and significant; implying that abundance of natural resources increases youth unemployment in SSA. Moreover, the results reveal some gender variations in the response of youth unemployment to education and foreign direct investment. Finally, the paper ends with some recommendations regarding the improvement of youth employment in SSA.

A Private Right of Action for the FCPA: Bringing Rule of Law to Failed States

The FCPA should be amended to include a private right of action in order to hold MNCs to a heightened standard of liability for their foreign corruption. This amendment is needed because the current mechanisms by which MNCs are held liable are all drastically inadequate, and rely on governments, that lack the political will or resources, to prosecute MNCs. It is important to prosecute MNCs for bribery of foreign officials because it acts as a deterrent to corruption and sets a moral standard that MNCs are accountable the host governments that give rise to their existence.

The Role of Foreign Direct Investment and State Capture in Shaping Innovation Outcome in Russia

This article explores the linkage between foreign direct investment, grand corruption (that is, state capture) and innovation in Russia's regions in between 1997 and 2010. The results indicate that during the period under investigation both foreign direct investment and state capture were the significant determinants of innovation outcome. What is also interesting is that a positive impact of state capture on innovation through foreign firms, and a negative impact—through exporting—was observed.

Bribery and Corruption in Telecommunications - New Approaches to Licencing

Reducing corruption in the telecommunications sector requires licensing reforms. Liberalisation ignored known risks of corruption in both developing countries and in the telecommunications sector, allowing bribery, cronyism and nepotism to enter and to flourish. A discussion of past and present corruption is essential, with politicians and CEOs setting a new, clean “tone at the top”. Public registers of the beneficial owners of operators are vital, without shell companies or nominees, including minority partners. Failure to disclose this information must carry penalties. Many countries require support to combine anticorruption effort with telecommunications sector policies and regulation. All countries must enforce obligations under the UN Convention Against Corruption (UNCAC) to criminalise domestic and foreign corruption, creating the capacity to investigate and prosecute.

Joint ventures between US MNCs and foreign governments

PurposeThe purpose of this paper is to determine the initial stock price reaction and long‐run returns for joint venture announcements between US MNCs and foreign governments as well as the firm characteristics and political risk factors of the foreign governments that affect the abnormal returns. In addition we determine changes in total and systematic risk following the joint venture.Design/methodology/approachAnnouncement abnormal returns are calculated using event study cumulative abnormal returns. Long‐run returns use a buy and hold methodology. Cross section regressions are performed on both the announcement and long run returns.FindingsAnnouncement abnormal returns are a positive 0.37 percent; however, the long‐run returns are a significant −3.99 percent the end of the first year. Both short‐run and long‐run returns are higher when the level of internal conflict is low, and surprisingly when the level of corruption is high. Also, surprisingly, short‐run returns are higher when ethnic violence is higher, but, as expected, long‐run returns are higher when there is higher democratic stability.Research limitations/implicationsOne implication is that when US managers are confronted by foreign government corruption, there may be a conflict between the success of the project and the ethical/legal requirements of the company.Originality/valueThe paper focuses on joint ventures with foreign governments rather than the usual foreign companies. Also, unlike previous papers that have used only one measure of political risk, this paper uses five of the PRS categories of political risk.

International Investment Arbitration and Corruption Claims: An Analysis of World Duty Free v. Kenya

In some recent investment arbitration cases, tribunals have been presented with facts that suggest that foreign investors and public officials in the host state have engaged in corrupt practices. In its analysis of the extension of the anti-corruption campaign to investment arbitration, this article examines the legal measures adopted to combat corruption before investor-state arbitral tribunals in light of a study of World Duty Free Co. Ltd. v. The Republic of Kenya. An examination of the background to the World Duty Free v. Kenya dispute, the broader circumstances that surrounded the dispute, and Kenya’s political climate that was not within the tribunal’s purview, demonstrate that investment arbitration tribunals are not sufficiently equipped to exhaustively tackle corruption. Given the intricate political and public nature of corruption, responses to foreign investment-related corruption also have to be multi-faceted.

Establishing Credibility in Southeast Asia: Foreign Investment and Corruption Reform in the Philippines

The Sandiganbayan is a specialized anti-corruption court in the Philippines. This paper provides an account of its establishment in the late 1970s, as well as a description of the political and economic climate under which it was created. I argue that the creation of this specialized court -- which still exists today -- was largely a response to a corruption scandal that implicated the government and that jeopardized the flow of foreign direct investment into the country.

Corruption, foreign aid and welfare to the poor

This paper investigates the impact of foreign aid and corruption on the welfare of different classes in an economy that receives aid and uses it to finance a public good. We use a general equilibrium model that consists of three goods and three income classes to derive our results. The most important result we obtain is to show that under certain conditions, aid and corruption immiserize the poor.

The Rise of the Prosecutorial Efforts in Foreign Corruption: Lessons Learned from Recent FCPA Cases

This paper surveys the five notable cases that illustrate the aggressiveness of the SEC and the DOJ in pursuing FCPA violators, but these cases are important because they provide indicators of possible directions that FCPA enforcements can take. DPC tells us of the unique FCPA risks of doing business in China. CCI tells us that although not penalized under the FCPA, the bribery of private parties can also be a criminal act under state law and can be part and parcel of FCPA enforcement in certain instances. Siemens highlights the extent that the SEC will take if the company neglects to take note of its obligations under the FCPA. Bourke tells us that one should be careful of the possibility of being dragged into an FCPA enforcement arising from acts that one did directly do. And FTI tells us that shareholders also suffer damages in FCPA incidents, often from the plunge of stock prices, and have been making forays into using FCPA-related internal control issues to support securities class action lawsuits. Taking from the lessons of these individual cases, the paper concludes with prescriptions on how to upgrade a company’s FCPA compliance program so that directors and officers can help their companies, and themselves, avoid FCPA violation and liability.

Popularising purity: Gender, sexuality and nationalism in HIV/AIDS prevention for South Korean youths

Abstract: This paper examines how HIV/AIDS gains its social meanings at the intersection of discourses about gender, sexuality and nationalism in Korea. It examines how a major Korean NGO reinforces media and government construction of HIV/AIDS as a national threat, and mobilises ‘purity’ as an indigenous value to resist the global onslaught. This Purity Campaign successfully draws on pre-existing narratives about Korean society and national development, constituting itself as a site for both the negotiation of meanings around HIV/AIDS as well as the impact of globalisation on Korea. The meaning of purity in the Campaign is expanded to connote a state of moral being beyond mere chastity to reinforce the nation's defence against foreign corruption. Changing gender relations and sexual expressions become targets of purification, with women shouldering a disproportionate burden of blame and responsibility. The Campaign relies heavily on universalising family rhetorics and national essence to popularise purity as the Korean way to build an AIDS-free society. Although purity becomes a symbol of moral order and national health, AIDS serves as a metaphor of foreign contamination and domestic anxieties. The discussion interweaves texts, interviews and ethnography, and draws on anthropological and cultural studies.

Impact of Perceived National Corruption on the Returns to US Multinationals in Transactions with Foreign Governments

In this exploratory study, we investigate the influence and effects of foreign government corruption on the market value and accounting outcomes of US multinational corporations. We use hierarchical cluster analysis on Transparency International Corruption scores to identify high and low corruption in both developed and developing countries. We argue that corruption obscures the true value of assets, makes valuation difficult, and reduces the potential gains of an acquisition. We find that firms acquiring assets from governments in high corruption environments tend to be larger in size and more intangible asset‐oriented than those expanding into low corruption environments. We find that the market responds much more favorably to expansions into low corruption environments than high corruption environments for both acquisitions and joint ventures. We find little evidence that long run accounting performance is adversely affected by government‐multinational relationships in high corruption environments. However, long run market value outcomes are negative for all firms entering into relationships with foreign governments, and are especially negative for joint venture relationships in developing high corruption environments. Finally, we find that systematic risk increases substantially for firms entering high corruption environments through trust‐based modes of expansions.