The Deterrent Effect of Federal Corporate Prosecution Agreements: An Exploratory Analysis

Abstract

In this paper, we explore the potential deterrent effect of federal pretrial agreements by examining the extent of violations subsequent to an organization signing a pretrial agreement. More specifically, this research examines the subsequent criminal, civil, and regulatory violations of 161 publicly-traded firms that signed federal deferred prosecution agreements and non-prosecution agreements between 2001 and 2020. Our analysis identified 87 recidivist companies with a total of 629 subsequent violations, eight of which were criminal violations. While most companies had only one subsequent violation, one company had 63 noted violations after signing the pretrial agreement. Our exploratory analyses reveal that companies paying larger penalties as part of the pretrial agreement were less likely to have subsequent violations, and, when examining U.S.-based companies only, that larger organizations were more likely to have subsequent violations. These preliminary results are important to understanding both corporate deterrence generally, and the use of pretrial agreements as a corporate deterrent specifically.