Michael G. Faure
University of Maastricht - Faculty of Law, Metro; Erasmus University Rotterdam (EUR) - Erasmus School of Law
University of Hamburg - Institute of Law and Economics; University of Bologna - Department of Economics
November 26, 2012
Production of Legal Rules, Cheltenham: Edward Elgar, 2011, 205-227
Maastricht Faculty of Law Working Paper
This is a chapter in a volume on the production of legal rules discussing the importance of social stigma and reputation. On the one hand the literature on social norms is discussed, explaining how, from an economic perspective, stigma can be inflicted through the use of the criminal law. Hence, the social process of stigmatization is described, explaining also how stigma depends on the number of individuals that may be stigmatized and the number of people that imposed the stigma. In addition, legal aspects of criminal sanctions are discussed, in the sense that the question is addressed to what extent a criminal conviction leads to reputational losses or to, as it is often refer to “naming and shaming”. Based on an overview of literature it is shown that these reputational effects (measured by decreases in stock prices of convicted corporations) often occur when the crimes affect parties with whom the corporation stands in a contractional relationship (like employees of customers); however, crimes that rather affect third parties (like the environment) do not seem have a significant reputational effect (at least measured in reduction of stock price).
Number of Pages in PDF File: 24
Keywords: social norms, stigma, reputation, naming and shaming, criminal law
JEL Classification: K42working papers series
Date posted: November 27, 2012
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