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A microeconomic model of opportunistic financial crimes: prosecutorial strategy when firms are too big to jail

Werle, Nick (2015) A microeconomic model of opportunistic financial crimes: prosecutorial strategy when firms are too big to jail. Procedia Economics and Finance, 28. pp. 76-84. ISSN 2212-5671

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Identification Number: 10.1016/S2212-5671(15)01084-9

Abstract

In the cases of corporate crime, US prosecutors can lodge charges against the corporation, its managers, or both. However, the emergence of systemically important firms, most notably in the financial sector, constrains prosecutors. This paper develops a new model of corporate criminal liability and shows how the Too Big To Jail problem reduces the deterrence effect of a crime control policy relying primarily on large corporate fines. Furthermore, this paper shows how corporate criminal liability may not incentivize a Too Big to Jail firm to invest in internal controls and may even attempt to subsidize an employees’ criminal activity. In the presence of Too Big to Jail firms, prosecutors should shift resources toward prosecutions of individual managers, so they bear a substantial personal risk from dealing dishonestly.

Item Type: Article
Official URL: http://www.sciencedirect.com/science/journal/22125...
Additional Information: © 2015 The Author © CC BY-NC-ND
Divisions: Finance
Subjects: H Social Sciences > HG Finance
H Social Sciences > HV Social pathology. Social and public welfare. Criminology
Sets: Departments > Finance
Date Deposited: 10 Nov 2016 10:39
Last Modified: 14 Aug 2019 23:09
URI: http://eprints.lse.ac.uk/id/eprint/68261

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