Do Mafia Ties Matter? Accountants with Mafia Connections, and the Quality of their Work as Monitors in the‘Clean’ Economy

58 Pages Posted: 18 Nov 2021 Last revised: 30 Jun 2023

See all articles by Pietro A. Bianchi

Pietro A. Bianchi

Florida International University

Jere R. Francis

University of Missouri

Antonio Marra

Bocconi University - Department of Accounting

Nicola Pecchiari

Bocconi University - Department of Accounting

Date Written: June 29, 2023

Abstract

We exploit a proprietary government database to identify Italian firms with alleged ties to the Mafia through their executives, directors, or shareholders. We assume that the accountants who work as auditors for these organizations are also corrupt, and term these individuals “suspect accountants”. We investigate the quality of the work by these suspect accountants in their role as auditors for “clean” firms with no known ties to the Mafia. We predict and find evidence that suspect accountants allow their clients (treatment firms) greater discretion to engage in earnings management behavior that lowers taxable income, compared to a control sample of “clean” firms and auditors with no known ties to the Mafia. The evidence is consistent with suspect accountants being low-quality monitors in the “clean” economy. Regulators and enforcement agencies should include accountants with ties to the Mafia in their policing and surveillance activities, and stronger incentives are needed to dissuade individuals with Mafia ties from providing such services.

Keywords: corrupt accountants; connections to organized crime; criminal investigations; financial reporting quality; earnings management; tax avoidance; accountant criminality

JEL Classification: G31,G32,G38, K42, K49

Suggested Citation

Bianchi, Pietro A. and Francis, Jere R. and Marra, Antonio and Pecchiari, Nicola, Do Mafia Ties Matter? Accountants with Mafia Connections, and the Quality of their Work as Monitors in the‘Clean’ Economy (June 29, 2023). Available at SSRN: https://ssrn.com/abstract=3957650 or http://dx.doi.org/10.2139/ssrn.3957650

Pietro A. Bianchi (Contact Author)

Florida International University ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

HOME PAGE: http://https://business.fiu.edu/faculty/expert-guides.cfm?FlagDirectory=Display&Emp=bianchip

Jere R. Francis

University of Missouri ( email )

Antonio Marra

Bocconi University - Department of Accounting ( email )

Via Roentgen 1
Milan, 20136
Italy

Nicola Pecchiari

Bocconi University - Department of Accounting ( email )

Via Roentgen 1
Milan, 20136
Italy

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