Anti‐mafia police actions, criminal firms, and peer firm tax avoidance

Chircop, Justin and Fabrizi, Michele and Malaspina, Patrizia and Parbonetti, Antonio (2023) Anti‐mafia police actions, criminal firms, and peer firm tax avoidance. Journal of Accounting Research, 61 (1). pp. 243-277. ISSN 0021-8456

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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 micro-level channels through which Mafia can affect firm outcomes and local economies.

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Journal Article
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Journal of Accounting Research
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Deposited On:
04 Aug 2022 13:55
Last Modified:
07 Mar 2023 16:20