Fines and reputational sanctions: The case of cartels

Mariuzzo, Franco, Ormosi, Peter and Majied, Zherou (2020) Fines and reputational sanctions: The case of cartels. International Journal of Industrial Organization, 69. ISSN 0167-7187

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In this article, we revive an old debate in the law and economics literature: the relative role of public and reputational sanctions in deterring misconduct. We propose an empirical framework, which accounts for public sanctions (in our case cartel fines) and a more direct measure of reputational sanctions, harnessing recent developments in opinion mining. We use the intensity and the sentiment of media exposure of misconduct as a measure of reputational effect and thus approximation of the reputational sanction. As a demonstra- tion, we combine an event study approach, sentiment analysis, and econo- metric techniques on a sample of 339 listed cartel member firms, prosecuted by the European Commission between 1992 and 2015. Our results offer ev- idence that in the context of cartels, public and reputational sanctions act as substitutes: where there is a reputational penalty, increasing this penalty reduces the effect of the public sanction. One the other hand, in the absence of a reputational punishment, the effect of the cartel fine steps in.

Item Type: Article
Additional Information: Early Title: Public and reputational sanctions: The case of cartels
Uncontrolled Keywords: cartels,event study,public sanctions,reputational sanctions,sentiment analysis,event study,reputational sanctions,public sanctions,fraud,returns,deterrent,event,market forces,leniency,penalties,aerospace engineering,economics and econometrics,economics, econometrics and finance (miscellaneous),industrial relations,industrial and manufacturing engineering,strategy and management ,/dk/atira/pure/subjectarea/asjc/2200/2202
Faculty \ School: Faculty of Social Sciences > School of Economics
Faculty of Social Sciences > Norwich Business School
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Depositing User: LivePure Connector
Date Deposited: 30 Jan 2020 04:14
Last Modified: 11 Jul 2020 00:05
DOI: 10.1016/j.ijindorg.2020.102584

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