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Corporate Criminal Liability and Optimal Behavior by Firms.Internal Monitoring Devices versus Managerial Incentives

Author

Listed:
  • Paolo Polidori

    (Department of Law, University of Urbino ?Carlo Bo?)

  • D?sir?e Teobaldelli

    (Department of Law, University of Urbino ?Carlo Bo?)

Abstract

Corporate criminal liability legislation has been the subject of a widespread debate around the world in response to the financial scandals of the early 2000s. The existing legal regimes en- tail compliance requirements, such as internal monitoring mechanisms, with the aim of inducing firms to detect the wrongful conduct of their agents. We develop an analytical framework to address when and to what extent firms may find convenient to adopt these regulatory devices. We conclude that more productive firms and those operating in sectors where managers have more opportunities to undertake criminal activities are more likely to prevent such activities (through monitoring or the payment of e? ciency wages). When the potential returns of ille- gal activities are high or when the firms are large, implementing internal monitoring devices may be optimal, while smaller firms should generally prefer the payment of efficiency wages to prevent crimes by managers.

Suggested Citation

  • Paolo Polidori & D?sir?e Teobaldelli, 2012. "Corporate Criminal Liability and Optimal Behavior by Firms.Internal Monitoring Devices versus Managerial Incentives," Working Papers 1216, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2012.
    • Handle: RePEc:urb:wpaper:12_16
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    References listed on IDEAS

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    More about this item

    Keywords

    Corporate Governance; Law Enforcement; Compliance; Deterrence; Regulation.;
    All these keywords.

    JEL classification:

    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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