FCPA and Market Quality in Emerging Economies

Author Name Krishnendu Ghosh DASTIDAR (Jawaharlal Nehru University) / YANO Makoto (Chairman, RIETI)
Creation Date/NO. November 2020 20-E-087
Research Project Social Scientific Studies on Self-replicating Natural and Technical Phenomenon
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In this paper we tried to explore the overall effects of FCPA in a corruption ridden emerging economy, where only the US firm is subject to FCPA regulations. We demonstrate the following.
(i) While an increase in fines under FCPA reduces overall corruption, it leads to a deterioration in the market quality in an emerging economy. (ii) If the products are substitutes (complements), overall corruption increases (decreases) and market quality in the emerging economy improves (deteriorates) with stricter enforcement of FCPA. (iii) An increase in the US firm's technological advantage unambiguously leads to a decrease in the market quality.