Making bribery profitable again? The market effects of halting extraterritorial accountability for overseas bribery

On February 10th, 2025, US President Trump signed an executive order ceasing initiation of any new investigations and enforcement actions under the Foreign Corrupt Practice Act (FCPA), which made it unlawful for US companies to bribe foreign public officials. We analyze market valuations of publicly traded companies on US financial markets before and after the announcement, finding that 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 effects cumulated substantively, resulting in capitalization gains for the average former target in corporate corruption cases of about $160M and out-sized returns to shareholders. This gain, which materialized for the average past FCPA target in a single trading day, is roughly the same amount as the historical mean of FCPA fines. These results allow us to contribute to long-standing debates about whether the costs firms experience from corruption are due to legal enforcement or 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 to be an important threat to investment in corrupt firms.