Compliance Programs, Signaling and Firms’ International Coordination

Compliance Programs, Signaling and Firms’ International Coordination

Fines imposed on firms for corporate infringements such as cartels re- duce these infringement's profitability. When a manager knows when a violation is unprofitable he can prevent violations committed by an uninformed employee by investing in compliance programs (CPs). In- vestments can be...

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Bibliografiske detaljer
Udgivet i:MAGKS - Joint Discussion Paper Series in Economics (Band 49-2017)
Hovedforfatter: Herold, Daniel
Format: Artikel
Sprog:engelsk
Udgivet: Philipps-Universität Marburg 2017
Fag:
Tone-at-the-top
Wirtschaft
Compliance
Crime
Economics
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Summary:Fines imposed on firms for corporate infringements such as cartels re- duce these infringement's profitability. When a manager knows when a violation is unprofitable he can prevent violations committed by an uninformed employee by investing in compliance programs (CPs). In- vestments can be interpreted as signals. The paper shows that there exists a separating equilibrium where high investments in CPs induce the employee to obey the law. However, if CPs are too expensive the signal is not credible. The manager can also show personal commit- ment to compliance ('tone-at-the-top'). Coordination on an efficient outcome will then be achievable if commitment is costly. Imposing high, individual sanctions on the manager disturbs a firm's internal coordination because he is unable to credibly signal that an infringe- ment does not pay off for the firm. However, imposing sanctions on the employee unambiguously deters violation.
Fysisk beskrivelse:24 Seiten
ISSN:1867-3678
DOI:10.17192/es2024.0470

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