Making Bribery Profitable Again? The Market Effects of Halting Extraterritorial Accountability for Overseas Bribery . International Organization

On February 10th, 2025, US President Trump signed an executive order ceasing initiation of any new investigations and enforcement actions under the Foreign Corrupt Practices Act (FCPA), which made it unlawful for US companies to bribe foreign public officials. We analyze market valuations of publicly traded multinationals on US financial markets before and after the announcement, finding that on the day of the executive order, former FCPA targets, whose stocks are publicly traded, experienced returns on equity markets that were about 0.69 percentage points higher than what would have been expected from stock market trends. The effects cumulated substantively, resulting in capitalization gains for the portfolio of past targets in corporate corruption cases of about $39B and out-sized returns to shareholders. These results allow us to contribute to long-standing debates about how much of the costs multinationals experience from corruption are due to legal enforcement versus the inefficiency and uncertainty it generates for firm operations. When legal enforcement is removed, valuations of firms at risk of corruption rise dramatically, indicating that investors perceive the legal costs to be an important threat to investment in corrupt firms. Halting FCPA enforcement is thus likely to induce market confidence in risky investments.