Unintended Consequences of Foreign Anti-Corruption Laws for Geographic Disclosure Transparency

50 Pages Posted: 8 Nov 2022 Last revised: 8 Mar 2024

See all articles by Donal Byard

Donal Byard

City University of New York (CUNY) - Stan Ross Department of Accountancy

Heemin Lee

Stan Ross Department of Accountancy, Zicklin School of Business, Baruch College, City University of New York

Edward Xuejun Li

City University of New York (CUNY) - Stan Ross Department of Accountancy

Amanda Sanseverino

Manhattan College

Date Written: March 4, 2024

Abstract

A growing body of research shows that anti-corruption laws lead firms to curb their operations in countries with a high risk of corruption, affirming the intended effect of these laws. However, this study documents an unintended consequence of anti-corruption laws: a reduction in the transparency of firms’ geographic disclosures with respect to their corruption risk. We find that U.S. multinationals subject to the 2010 U.K. Bribery Act (UKBA) report a larger portion of revenues in more opaque regions (e.g., Europe) following the law’s adoption, rather than in more transparent country-level disclosures. This decline in transparency is not attributable to firms aggregating country-level disclosures into regional reporting areas; rather, it arises from firms reporting a greater share of revenues from their existing, less transparent regions without updating their reporting areas to reflect changes in their business operations induced by the law. Our findings highlight how a change in exposure to foreign anti-corruption laws, coupled with the relevant accounting standards’ lack of guidance as to when firms must update their geographic disclosures, can reduce transparency. Our results emphasize the importance of firms adapting their reporting strategies in response to changes in their regulatory and business environments.

Keywords: Geographic reporting, corruption, transparency, U.K. Bribery Act, ASC 280

JEL Classification: F23; F60; K20; M40

Suggested Citation

Byard, Donal and Lee, Heemin and Li, Edward Xuejun and Sanseverino, Amanda, Unintended Consequences of Foreign Anti-Corruption Laws for Geographic Disclosure Transparency (March 4, 2024). Available at SSRN: https://ssrn.com/abstract=4266130 or http://dx.doi.org/10.2139/ssrn.4266130

Donal Byard

City University of New York (CUNY) - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
646-312-3187 (Phone)
646-312-3161 (Fax)

Heemin Lee

Stan Ross Department of Accountancy, Zicklin School of Business, Baruch College, City University of New York ( email )

55 Lexington Ave
New York, NY 10010
United States
6463123164 (Phone)

Edward Xuejun Li (Contact Author)

City University of New York (CUNY) - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
646-312-3235 (Phone)

Amanda Sanseverino

Manhattan College ( email )

Manhattan College Parkway
Riverdale, NY 10471
United States

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