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Article
Publication date: 1 December 2023

Claire Nolasco Braaten and Lily Chi-Fang Tsai

This study aims to analyze corporate mail and wire fraud penalties, using bounded rationality in decision-making and assessing internal and external influences on prosecutorial…

Abstract

Purpose

This study aims to analyze corporate mail and wire fraud penalties, using bounded rationality in decision-making and assessing internal and external influences on prosecutorial choices.

Design/methodology/approach

The study analyzed 467 cases from 1992 to 2019, using data from the Corporate Prosecution Registry of the University of Virginia School of Law and Duke University School of Law. It examined corporations facing mail and wire fraud charges and other fraud crimes. Multiple regression linked predictor variables to the dependent variable, total payment.

Findings

The study found that corporate penalties tend to be lower for financial institutions or corporations in countries with US free trade agreements. Conversely, penalties are higher when the company is a U.S. public company or filed in districts with more pending criminal cases.

Originality/value

This study’s originality lies in applying the bounded rationality model to assess corporate prosecutorial decisions, unveiling external factors’ influence on corporate penalties.

Details

Journal of Financial Crime, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 19 February 2024

Adam W. Du Pon, Andrea M. Scheetz and Zhenyu “Mark” Zhang

This study aims to examine the determinants of Foreign Corrupt Practices Act (FCPA) violations and consequences of FCPA enforcements.

Abstract

Purpose

This study aims to examine the determinants of Foreign Corrupt Practices Act (FCPA) violations and consequences of FCPA enforcements.

Design/methodology/approach

This paper uses publicly available data from Compustat, I/B/E/S and Thomson Reuters databases, combined with Securities and Exchange Commission (SEC) and Department of Justice (DOJ) cases, to extract insights on FCPA violations and enforcements using econometric approaches.

Findings

The main determinants of FCPA violations appear to be firm size, multinational structure, country corruption and Sarbanes-Oxley Act control weaknesses. Traditional misreporting risks (F-score and M-score) do not predict FCPA violations. This study discovers significant differences between FCPA violations by motivation, as in, sale generation, rent extraction or cost evasion. Bribes motivated by sale generation or rent extraction are partially driven by the extent of the firm’s global operations, whereas bribes motivated by cost evasion relate to internal influences. This study also finds that enforcement is more salient for criminal violations (DOJ enforcement), compared to civil violations (SEC enforcement).

Research limitations/implications

This research provides new insights into the determinants of FCPA violations while underscoring the need for effective measures to combat bribery and promote ethical business practices. This research contributes to the ongoing efforts to curtail bribery, offering valuable insights into the characteristics of firms more likely to engage in bribery and contexts in which these activities occur. It provides critical implications for regulatory bodies, highlighting the differential responses of firms to varying types of enforcement, namely, criminal versus civil, as the authors observe greater decreases in internal control weaknesses following DOJ enforcement compared to SEC enforcement.

Practical implications

For enforcement agencies, the findings underscore the importance of rigorous criminal enforcement against FCPA violations, highlighting the improved control environments prompted by DOJ actions. Managers will find this research relevant, as it demonstrates that a firm’s entry into international markets substantially elevates the risk of its representatives engaging in bribery with foreign officials. In addition, the results are of interest to regulators, revealing that the underlying motivations driving a firm’s activities can significantly alter the factors to consider that might lead to an FCPA violation.

Originality/value

This paper is the original work of the authors and explores the determinants and consequences of FCPA violations and enforcement actions since 2002. To the best of the authors’ knowledge, it is the first to explore bribe determinants by their motive and documents industry-wide benefits arising from criminal enforcement.

Details

Journal of Financial Crime, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1359-0790

Keywords

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