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Anti‐Mafia Police Actions, Criminal Firms, and Peer Firm Tax Avoidance

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  • JUSTIN CHIRCOP
  • MICHELE FABRIZI
  • PATRIZIA MALASPINA
  • ANTONIO PARBONETTI

Abstract

Mafia firms introduce distortions in the markets in which they operate, increasing the cost of doing business for peer firms. We investigate whether peers respond by increasing their tax avoidance and thus increasing funds available to compete with the Mafia firms. Using a sample of Italian anti‐Mafia police actions that resulted in the removal of Mafia firms and a difference‐in‐differences approach, we find that peers reduce their tax avoidance following these actions. We further show that, following anti‐Mafia police actions, peer firms improve their performance and increase capital investment while enjoying a reduction in the cost of raw materials. Overall, our results highlight the microlevel channels through which Mafia can affect firm outcomes and local economies.

Suggested Citation

  • Justin Chircop & Michele Fabrizi & Patrizia Malaspina & Antonio Parbonetti, 2023. "Anti‐Mafia Police Actions, Criminal Firms, and Peer Firm Tax Avoidance," Journal of Accounting Research, Wiley Blackwell, vol. 61(1), pages 243-277, March.
    • Handle: RePEc:bla:joares:v:61:y:2023:i:1:p:243-277
    DOI: 10.1111/1475-679X.12455
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