When, on 10 February 2025, United States President Donald Trump signed the executive order suspending the enforcement of the Foreign Corrupt Practices Act (FCPA), companies previously involved in overseas corruption cases collectively gained around USD 39 billion. On average, on that day, each individual company that had been subject to investigations or sanctions under the FCPA increased its market capitalisation by USD 160 million. One month later, the average gain per company had risen to approximately USD 6.5 billion.
The data come from a study published in the journal International Organization and authored by Lorenzo Crippa (University of Strathclyde), Edmund J. Malesky (Duke University) and Lucio Picci (University of Bologna). Using sophisticated statistical analysis methods, the scholars examined companies' market valuations before and after the suspension of the Foreign Corrupt Practices Act. The aim was to understand how this decision by the US administration affected investor behaviour.
"The reaction of investors suggests that the main deterrent to corruption is the risk of legal sanctions: once this threat is removed, companies already known for risky behaviour in the area of corruption are perceived as more profitable," says Lucio Picci, professor in the Department of Economics at the University of Bologna. "Over recent decades, the United States has played a crucial role in countering corruption practices at the international level: this abrupt change of course could now have serious consequences for the future of global anti-corruption institutions."
When the Foreign Corrupt Practices Act came into force in 1977, the United States became the first country in the world to adopt legislation designed to prevent international corruption: the law establishes that US individuals and companies may not bribe foreign officials to obtain or retain business relationships.
However, the law was suspended without prior notice on 10 February 2025 by an executive order signed by United States President Donald Trump. The scholars therefore took the opportunity to analyse how this shift in anti-corruption policy affected 261 companies listed on US stock exchanges that had previously been investigated or sanctioned for violations of the Foreign Corrupt Practices Act. The market performance of these companies was compared with that of 236 comparable firms that had never been subject to investigations for breaches of anti-corruption rules.
"President Trump justified his decision to suspend the Foreign Corrupt Practices Act by arguing that the law represents an obstacle for US multinational companies compared with their competitors elsewhere in the world," explains Professor Picci. "If this were true, however, all US multinationals should have benefited from the administration's decision; our data instead show that the suspension of the FCPA disproportionately benefited companies already involved in overseas corruption cases compared with those that have never been investigated."
On the day the executive order suspending the Foreign Corrupt Practices Act was signed, 10 February, the researchers calculated an average increase of USD 160 million in the market capitalisation of companies already involved in overseas corruption cases – a figure comparable to the average fine imposed on companies previously convicted of violating the anti-corruption law.
On that day, the total gain for the companies considered amounted to approximately USD 39 billion, with individual multinationals previously involved in corruption cases recording increases in market capitalisation in the order of billions of dollars – figures that exceed the largest fines ever imposed for FCPA violations.
"Investors interpreted this decision by the US administration as a signal that investing in these companies had become less risky and more profitable in the short term," Picci confirms. "This led to significant increases in the market capitalisation of companies that were more likely to become involved in investigations for violations of the anti-corruption law, generating substantial returns for investors."
The scholars stress that the consequences of suspending this law do not stop at the US context, as they could prompt other countries to scale back their own efforts to combat international corruption.
Between 2000 and 2018, more than half of all anti-corruption legal cases involving companies worldwide were pursued by US authorities. A quarter of all cases were initiated by the United States against non-US companies. This strong enforcement action also encouraged other countries to strengthen and expand their own oversight activities. The risk now is that the shift in direction by the United States will lead to an overall reduction in global anti-corruption efforts.
"When there are stringent regulations and effective oversight, markets can be directed towards less risky and more socially beneficial investments," Picci comments. "But when regulations are suspended, this positive effect risks coming to a halt, because investors may no longer be discouraged from backing companies that do not comply with the rules."
