Public and reputational sanctions: The case of cartels

Franco Mariuzzo, Peter Ormosi and Zherou Majied
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Franco Mariuzzo: Centre for Competition Policy and School of Economics, University of East Anglia
Peter Ormosi: Centre for Competition Policy and Norwich Business School, University of East Anglia
Zherou Majied: Rayyan Al-Iraq Group, Baghdad, Iraq

No 2018-06v3, Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) from Centre for Competition Policy, University of East Anglia, Norwich, UK.

Abstract: In this article, we revive an old debate in the law and economics literature: the relative role of public and reputational sanctions in deterring misconduct. We propose an empirical framework, which accounts for public sanctions and a more direct measure of reputational sanctions, harnessing recent developments in opinion mining. We use the intensity and the sentiment of media exposure of misconduct as a measure of reputational effect and thus approximation of the reputational sanction. As a demonstration, we combine an event study approach, sentiment analysis, and econometric techniques on a sample of 339 listed cartel member firms, prosecuted by the European Commission between 1992 and 2015. Our results offer evidence that in the context of cartels, public and reputational sanctions act as substitutes.

Keywords: Cartels; event study; public sanctions; reputational sanctions; sentiment analysis (search for similar items in EconPapers)
JEL-codes: K4 L4 (search for similar items in EconPapers)
Date: 2019-12-01
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