Forbidden Payment: Foreign Bribery and American Business After 1977

TLDR

The United States prohibits American individuals and corporations from bribing foreign officials, with 1976–77 legislation imposing tax penalties, fines, and prison terms for violations. This study investigates how the 1977 Foreign Corrupt Practices Act affected U.S. firms’ operations in countries prone to bribery.

Abstract

The United States prohibits American individuals and corporations from bribing foreign government officials. Legislation enacted in 1976 and 1977 stipulates tax penalties, fines, and even prison terms for executives of American companies that pay illegal bribes. This paper examines the effect of US anti-bribery legislation on the operations of US firms in bribe-prone countries after 1977. Four separate indicators reveal that US business activities in these countries fell sharply after passage of the Foreign Corrupt Practices Act of 1977. These results suggest that this unilateral action by the United States served to weaken the competitive positions of American firms without significantly reducing the importance of bribery to foreign business transactions.