New Economics Papers
on Law and Economics
Issue of 2012‒11‒24
two papers chosen by
Jeong-Joon Lee, Towson University

  1. Corporate Criminal Liability and Optimal Behavior by Firms.Internal Monitoring Devices versus Managerial Incentives. By Paolo Polidori; Désirée Teobaldelli
  2. Letting the briber go free: an experiment on mitigating harassment bribes By Abbink, Klaus; Dasgupta, Utteeyo; Gangadharan, Lata; Jain, Tarun

  1. By: Paolo Polidori (Department of Law, University of Urbino “Carlo Bo”); Désirée 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.
    Keywords: Corporate Governance, Law Enforcement, Compliance, Deterrence, Regulation.
    JEL: K22 K42 G34 G38 L50
    Date: 2012
  2. By: Abbink, Klaus; Dasgupta, Utteeyo; Gangadharan, Lata; Jain, Tarun
    Abstract: This paper examines the effectiveness of using asymmetric liability to combat harassment bribes. Basu (2011) advocates legal immunity for bribe-givers, while retaining culpability for bribe-takers. Results from our experiment indicate that while this policy has the potential to significantly reduce corrupt practices, weak economic incentives for the bribe-giver, or retaliation by bribe-takers can mitigate the positive disciplining effect of such an implementation. As a result, asymmetric liability on its own may face challenges in the field.
    Keywords: harassment bribes; experiment; asymmetric penalty; retaliation
    JEL: K42 C91
    Date: 2012–10–16

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