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

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). I find that, following adoption of the UKBA, US firms subject to its jurisdiction curb their business in high-corruption-risk countries, 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. These findings suggest that, for exposed US firms, the UKBA introduced foreign regulatory costs incremental to those associated with the US Foreign Corrupt Practices Act. This study is the first to provide empirical evidence of the effects of foreign anti-corruption laws on US firms. This evidence supports extraterritoriality as a key element of effective anti-corruption legislation and highlights its role in regulating multinational firms in the globalized economy