The impacts of anti-bribery enforcement actions on targeted firms

We use data from enforcement actions initiated under the U.S. Foreign Corrupt Practices Act (FCPA) to examine firms’ incentives to pay bribes and their costs when they are caught. Bribery is associated with projects that are valuable even considering the expected penalties. For firms that are caught, the average ex post NPV net of penalties is still non-negative and the reputational loss is negligible. For a subset of firms that face comingled charges for financial fraud, however, the direct cost and reputational loss are large and the ex post NPV is negative.