Corporate Crime Legislation: A Political Economy Analysis
Vikramaditya S. Khanna
University of Michigan Law School
Abstract:
Corporate crime has once again become an important issue on the U.S. legislative agenda leading Congress and the various regulatory bodies to tighten the law and enhance honesty and completeness in disclosure. However, the continued and rather explosive growth of corporate crime legislation leaves one with a rather strange puzzle: how can such a state of the world arise? After all, corporations and business interests are considered some of the most, if not the most, powerful and effective lobbyists in the country. Yet, we witness the continued expansion of legislation that criminalizes their behavior (one estimate suggests over 300,000 federal regulatory offenses that can be prosecuted criminally). How could this have happened? This paper sets out to answer this puzzle.
An answer is important not only for understanding the political dynamics of current regulation, but also because it provides insights into the effectiveness of our current approach for regulating corporate wrongdoing. Overall, my analysis suggests that most corporate crime legislation arises at times when there is a large public outcry over a series of corporate scandals during or around a downturn in the economy. In such a situation Congress must respond and corporate crime legislation may be the preferred response for some corporate interests. This is because it satisfies the public outcry while imposing relatively low costs on corporate interests, avoiding legislative and judicial responses that are more harmful to their interests, and sometimes helping to deflect criminal liability away from managers and executives and on to corporations. This explains not only the impressive growth of corporate crime legislation, but also leads to some surprising normative conclusions. In particular, it leads to the counter-intuitive result that if one starts with the view that there is under-deterrence of corporate wrongdoing then one would probably prefer to reduce corporate criminal liability and focus more on corporate civil liability and managerial liability.
Number of Pages in PDF File: 51
Financial Credibility, Ownership, and Financing Constraints in Private Firms
Ole-Kristian Hope
University of Toronto - Rotman School of Management
Wayne B. Thomas
University of Oklahoma - Michael F. Price College of Business
Dushyantkumar Vyas
University of Minnesota - Twin Cities
Abstract:
As shown in the international business literature, the ability of controlling owners to extract private benefits is greater in countries with weaker legal institutions. In these countries, providing credible financial information could play an especially important role in reducing information asymmetry between private firms and external providers of finance. For our sample of firms across 68 countries, we find that firms with greater financial reporting credibility (i.e., annual financial statements reviewed by an external auditor) experience significantly lower perceived problems in gaining access to external finance. Further, the impact of financial credibility in reducing financing constraints in the presence of a controlling owner is more pronounced in countries with weaker creditor rights. Given the predominance of private firms around the world, their economic significance, and the fact that an increasing number of private firms now operate in multinational environments with different institutional features, we contribute to the literature on the role of financial information, firm characteristics, and country-level institutions for an important and interesting group of firms.
Number of Pages in PDF File: 49
Corporate Social Responsibility and Firm's Objectives - A Synthesis
Chendrayan Chendroyaperumal
Anna University of Technology Chennai - Saveetha Engineering College; Deceased
Abstract:
Corporate Social Responsibility (CSR) has been attracting attention recently by the corporate world worldwide. The corporations discharge their CSR through social development in various ways in varying degree. However the practice of CSR has also attracted controversy and criticism. There are two opposing arguments namely (i) the corporations profit in manifold ways by spending on CSR projects; and (ii) CSR is criticized and opposed in that it makes the corporations deviate from their primary economic roles in doing business. This debate and criticism revolve around the basic objective of the firm. Modern scholars have proposed many different objectives for firms which again are also abound with raging controversy and criticism. This paper attempts to identify the primary objective of a firm from the primary objective of an economy and synthesizes the hitherto different objectives with CSR to get a holistic view. This will not only put the controversy regarding the objectives of the firm to rest but also has interesting implications for the recent corporate social responsibility of business, environmental concerns, and questions the need for a separate theory of public firm as well!
Number of Pages in PDF File: 5
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