Enhanced FCPA Enforcement and US Firms’ Foreign Investments

Prof. Yangyang CHEN
City University of Hong Kong

Date: 4 September 2023 (Monday)
Time: 2:30 pm – 4:00 pm
Venue: E22 – G015
Host: Prof. Jason XIAO, Professor in Accounting
Online registration: https://umac.au1.qualtrics.com/jfe/form/SV_07GnDOR4dfYaUeO


This paper examines whether the enhanced enforcement of the Foreign Corrupt Practices Act (FCPA) that occurred after 2004 affects US firms’ foreign investments. We find that after that year, US firms increase their investments in bribery-prone countries relative to their non-US counterparts that are unaffected by the enhanced FCPA enforcement. Moreover, these investments are more concentrated in regions where US firms adapted more to the FCPA before 2004 or where the FCPA deters foreign competitors more since 2004, verifying that enhanced FCPA enforcement helps US firms gain a competitive advantage. Cross-sectional tests show that the effect is more pronounced for US firms with more effective internal controls, those with higher financial or investment flexibility, and those operating in bribery-prone countries with fewer restrictions on foreign investment or in countries with higher levels of financial development. Further analyses document that enhanced FCPA enforcement improves US firms’ investment efficiency in bribery-prone countries.


Prof. Yangyang CHEN is the professor and acting head of Department of Accountancy in City University of Hong Kong. He received his PhD from University of Melbourne and worked at Hong Kong Polytechnic University and Monash University before joining City University of Hong Kong. His research interests are in corporate finance and financial accounting, including management compensation, corporate innovation, audit quality and pricing, earnings management, corporate disclosure, and so on. His works have been published in The Accounting Review, Journal of Accounting Research, Journal of Financial Economics, Journal of Financial and Quantitative Analysis, Contemporary Accounting Research, Review of Accounting Studies etc.

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