The Economic Consequences of Criminal Firms
Presented at the 2019 Global Issues in Accounting Conference at Chicago Booth
50 Pages Posted: 5 Sep 2019 Last revised: 17 Nov 2019
Date Written: December 18, 2017
This paper investigates the economic consequences of firms connected to organized crime (criminal firms) and shows that when a criminal firm is eliminated from an industry, the performance of non-criminal competitors significantly increases. We also show that the positive effect on the performance of non-criminal competitors after the elimination of the criminal competitor includes improved efficiency and reduced procurement costs. Finally, we document that financially constrained firms benefit the most from the elimination of the criminal competitors and that the presence of criminal firms reduces the level of investment of peers firms.
Keywords: organized crime, competition, performance, Mafia, corporate connections
JEL Classification: M10, M41, G30
Suggested Citation: Suggested Citation