Abstract

This paper examines the impact of violations of export control policy from a multinational enterprise’s
perspective. We describe the kinds of regulation in place in the U.S. over the past decade, and identify the
characteristics of firms who have been caught and fined for violations of export restrictions. Furthermore, we
investigate the response of shareholders to news regarding trade violations and find that they suffer a statistically
significant -1.15% abnormal returns over the three day announcement window. Not surprisingly, we find that the
reaction post 9–11 is worse as is the reaction when the export violations occur with countries perceived to be
corrupt. We also find that systematic risk and total risk increase for violators following their investigations.
Further, any penalty in terms of long run performance for ECA violations is limited to those violations with the
“corrupt” countries.

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