Title: Giving Beyond Borders: Anti-bribery Enforcement and Philanthropic Giving Overseas

Authors: Weishi Jia (Cleveland State University), Albert Tsang (Southern University of Science and Technology), Danlei Bonnie Yu (Soochow University), Jingran Zhao (The Hong Kong Polytechnic University)

Abstract: Companies engage in corporate philanthropy internationally. Prior studies on corporate philanthropy have focused on giving to domestic institutions while factors that drive corporate giving beyond domestic borders remain unclear. Using corporate bribery of foreign government officials and the related enforcement under the U.S. Foreign Corrupt Practices Act (FCPA) as a negative shock, we examine U.S. multinational enterprises’ (MNEs’) strategic use of philanthropic giving to foreign host countries. We predict and find that both focal firms of FCPA enforcement and peer U.S. MNEs operating in the same foreign host country experience significant reputation loss following focal firms’ FCPA violations. Peer firms also face heightened enforcement risk from FCPA authorities after focal firms’ cases. Employing a staggered difference-in-differences design, we further show that while focal firms do not change their philanthropic giving after their FCPA cases, peer MNEs significantly increase such giving to repair the reputation damage due to negative spillovers from focal firms, to lower their own FCPA enforcement risk, and to reduce the regulatory penalties and reputation loss from future enforcement actions.