Market effects of suspending accountability for overseas bribery
Research co-authored by Edmund Malesky examines the market effects of pausing the enforcement of the Foreign Corrupt Practices Act (FCPA), providing insight into how investors understand the threat of international anti-corruption enforcement.
In February 2025, U.S. President Trump signed an executive order blocking the initiation of any new investigations or enforcement actions under the FCPA, which had made it unlawful for U.S. companies to bribe foreign public officials.
Malesky, professor of political economy and director of the Duke Center for International Development, and co-authors Lorenzo Crippa, University of Strathclyde, and Lucio Picci, University of Bologna, analyzed market valuations of publicly traded multinationals on U.S. financial markets before and after the executive order announcement.
Their paper, “Making Bribery Profitable Again? The Market Effects of Suspending Accountability for Overseas Bribery,” is published by International Organization, a leading peer-reviewed journal covering the field of international affairs.
The authors found that investors interpreted Trump’s suspension of FCPA enforcement as a significant reduction to their risk of investing in companies likely entertaining corrupt behavior.
“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 authors wrote in the paper’s abstract. “The effects cumulated substantively, resulting in capitalization gains for the portfolio of past targets of corporate corruption cases of about USD 39 billion and outsized 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 as an important threat to investment in corrupt firms. Suspending FCPA enforcement is thus likely to induce market confidence in risky investments.”