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What happens in criminal firms after godfather management removal? Judicial administration and firms’ performance

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  • Francesca M. Calamunci

    (University of Messina)

Abstract

In this paper, I assess the causal effects of judicial administration on a sample of Italian criminal firms in the period 2004–2016 to shed light on the dynamic path of the firm’s performance from pre-seizure to the post-entry judicial administration phase. By using exogenous enforcement law decisions imposed by authorities for each case, I estimate their impact, highlighting the economic consequences of having new legal governance aiming to establish legality and the perpetuation of activities. The results show that there are adverse effects on profitability and efficiency with an increase in the leverage level. The empirical evidence shows how organised crime firms are intrinsically managed by their dark criminal side; removing the criminal ties makes it challenging to maintain profitability and efficiency. Overall, the negative results are due to difficulty in establishing a new economic framework for (ex-criminal) firms in which they are able to operate efficiently and according to market rules.

Suggested Citation

  • Francesca M. Calamunci, 2022. "What happens in criminal firms after godfather management removal? Judicial administration and firms’ performance," Small Business Economics, Springer, vol. 58(1), pages 565-591, January.
    • Handle: RePEc:kap:sbusec:v:58:y:2022:i:1:d:10.1007_s11187-020-00439-4
    DOI: 10.1007/s11187-020-00439-4
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    Cited by:

    1. Francesca M. Calamunci & Livio Ferrante & Rossana Scebba, 2022. "Closed for mafia: Evidence from the removal of mafia firms on commercial property values," Journal of Regional Science, Wiley Blackwell, vol. 62(5), pages 1487-1511, November.
    2. Alfano, Maria Rosaria & Cantabene, Claudia & de Iudicibus, Alessandro, 2024. "The effectiveness of a certification of legality. Evidence from Italian firms," MPRA Paper 120306, University Library of Munich, Germany.

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    More about this item

    Keywords

    Organised crime; Enforcement Law; Firm level data; Panel data analysis;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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