ABSTRACT
This chapter discusses corruption involving foreign countries and representatives of multinational firms working overseas, corruption occur in developed countries. Whether shareholders gain or lose through corruption depends upon whether or not corruption payments affect the revenue and costs of public companies. When rule of law is weaker, individuals tend to direct social interactions and to be more arbitrary in decision making, rather than laws and norms being uniformly applied to everyone. Employees and managers of firms are charged with producing quality products, containing costs, improving efficiency, and generally with preserving the value of the firm so that shareholders assets are maintained. Principal agent model seeks to explain how contracts between agents, such as an employee-manager and an owner, can fail to protect the interests of the principal. The international institution for setting higher accounting standards is the International Accounting Standards Board. One way that it does this is by establishing international financial reporting standards (IFRS).
