Foreign Bribery and Takeovers : International Evidence

Bribery is a key consideration in cross-border takeovers. Using exogenous implementations of anti-bribery laws cross 41 countries, I find that criminalizing acquirers for foreign bribery reduces aggregate cross-border M&A activities by approximately 30%, acquirers' gains by over half, and bid premium by 10%. These effects are stronger for public transactions and for targets located in countries (industries) with a higher level of corruption. Taken together, the findings support the efficient side-payment model, which predicts a positive relation between bribery and cross-border transaction value