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Private and public control of management

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  • Angelucci, Charles
  • Han, Martijn A.

Abstract

This paper investigates the design of a leniency policy to fight corporate crime. We explicitly take into account the agency problem within the firm. We model this through a three-tier hierarchy: authority, shareholder, and manager. The manager may breach the law and report evidence to the authority. The shareholder writes the manager's incentive scheme, monitors him, and possibly reports evidence to the authority. Finally, the authority designs a sanctioning/leniency policy that deters corporate crime at the lowest possible cost. The authority designs its policy trying to both (i) exacerbate agency problems within non-compliant firms and (ii) alleviate agency problems within compliant firms. We find that depending on the authority's ability to punish the manager, the authority may wish to instigate a within-firm race to the courthouse. We also provide comparative statics, carry a welfare analysis and discuss policy implications.

Suggested Citation

  • Angelucci, Charles & Han, Martijn A., 2012. "Private and public control of management," SFB 649 Discussion Papers 2012-058, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    • Handle: RePEc:zbw:sfb649:sfb649dp2012-058
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    Citations

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    Cited by:

    1. Argenton, C. & van Damme, E.E.C., 2014. "Optimal Deterrence of Illegal Behavior Under Imperfect Corporate Governance," Other publications TiSEM e037f38f-8c76-402a-bbaa-6, Tilburg University, School of Economics and Management.
    2. Sergiu-Vlad Stan & Marius-Anton Stupar, 2020. "The Public Management Reform in Romania," Logos Universalitate Mentalitate Educatie Noutate - Sectiunea Stiinte Economice si Administrative/ Logos Universality Mentality Education Novelty - Section: Economical and Administrative Sciences, Editura Lumen, Department of Economics, vol. 5(1), pages 30-37, May.
    3. Catarina Marvão & Giancarlo Spagnolo, 2018. "Cartels and leniency: Taking stock of what we learnt," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume II, chapter 4, pages 57-90, Edward Elgar Publishing.
    4. Angelucci, Charles & Russo, Antonio, 2012. "Moral Hazard in Hierarchies and Soft Information," TSE Working Papers 12-343, Toulouse School of Economics (TSE).
    5. Leslie M. Marx & Claudio Mezzetti & Robert C. Marshall, 2015. "Antitrust Leniency with Multiproduct Colluders," American Economic Journal: Microeconomics, American Economic Association, vol. 7(3), pages 205-240, August.

    More about this item

    Keywords

    corporate crime; white-collar crime; leniency; compliance; antitrust;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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