The Impact of the Foreign Corrupt Practices Act on Investment Decisions.

• In Event: Breakfast and Research Forum
  In Paper Session: Table 1

Abstract

The Foreign Corrupt Practices Act (FCPA) has become a major focus for corporations, the Securities and Exchange Commission (SEC), and the Department of Justice (DOJ). The FCPA prohibits corporations from bribing any foreign officials to receive a competitive advantage, requires corporations to maintain an accurate internal control system, and requires corporations to accurately and fairly present all transactions to appropriately reflect its business dealings. Since 2000, FCPA enforcement actions have dramatically increased along with the amount of civil and criminal penalties. This study examines the effects of FCPA violations and penalties assessed by the SEC on investment decisions for nonprofessional investors. The results of this study show that investors are most willing to decrease their investment when the severity of the FCPA violation is high and penalty for that violation is high. Interestingly, the results also show that investors are just as willing to increase their investment when the severity of the violation is low and the penalty is either low or high.

Author

• Wioleta Celina Olczak, University of Central Florida