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Do anti-bribery laws reduce the cost of equity? Evidence from the U.K. Bribery Act 2010

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Original languageEnglish
Pages (from-to)438-455
JournalJournal of Business Finance & Accounting
Volume47
Issue number3-4
Early online date2 May 2020
DOIs
Publication statusE-pub ahead of print - 2 May 2020

Abstract

We examine the impact of the U.K. Bribery Act 2010 on the implied cost of equity. We find a significant reduction in the cost of equity amongst U.K. firms with high bribery exposure after the passage of the Bribery Act. We further show that the Bribery Act improves internal control system and increase stock liquidity of firms with high bribery exposure. Our results suggest that more stringent anti-bribery regulations are not always bad for the firm.

    Research areas

  • bribery, anti-bribery law, cost of equity, residual income valuation, internal control, stock liquidity, information asymmetry

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