Empirical Analysis of the Capital Markets’ Responses to International FCPA Incidents

• In Event: Corruption and Ethics

Abstract

The commonality of international FCPA incidents and the quest for who should be accountable motivates this investigation. We used empirical data to address the research question of how capital markets respond to international corruption events once communicated to the public at large. Our evidence suggests that capital markets show positive outcomes once the event is settled. This counterintuitive finding suggests shareholders dissipate potential doubt about the stability of firms, guided by analysts’ revised expectations rather than judging ethical implications. As a consequence, executives may not face investors’ disapproval, which would encourage them to focus on preventive efforts. Financial performance indicators of firms do not influence the behavior of investors after these incidents.

Authors

• Jesus Rodolfo Jimenez Andrade, Texas A&M University - San Antonio

• Timothy J Fogarty, Case Western Reserve University

• Gregory A Jonas, Case Western Reserve University