January 18: Lorenzo Crippa (Essex)

Monday, January 18

Lorenzo Crippa (University of Essex), “The Conditional Arm of the Law. The Effect of the OECD Anti-Bribery Convention on Foreign Direct Investment”


Corporate criminal regulations are often criticized for increasing costs to firms and deterring their foreign investment. Yet, the conditions for the effect to occur are understudied. This paper studies the impact of corporate criminal policies home states adopted with the 1997 OECD Anti-Bribery Convention on their firms’ outward investment. It argues that their effect on investment depends on the level of corruption of the host economy. The effect is null in clean countries. Where corruption is mild, anti-bribery laws empower firms: they provide a legal leverage to refuse paying costly bribes. The effect on investment is positive. Where corruption is endemic, instead, these policies deter investment: they expose firms to the risk of prosecution without providing any effective leverage. The effect is negative. Multilevel logit models test the argument, explaining investment decisions of 3871 individual firms between 2006 and 2011. Companies from signatories have a 40% higher probability of investing in mildly corrupt economies than those from non-signatories, which plummets to -50% in extremely corrupt countries. Difference-in-differences models of country-dyad investment flows corroborate this finding. Results show that anti-bribery policies pull firms away from extremely corrupt economies, which are left exposed to companies that are not bound by anti-corruption standards. This informs a re-evaluation of anti-bribery policies.