Financial Performance and The Legal Landscape: An International Study of Controversial Business Activities

Paolo Mazza, Mikael Petitjean and Ariana Tohlukov
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Paolo Mazza: IESEG School of Management
Mikael Petitjean: Université catholique de Louvain, LIDAM/LFIN, Belgium
Ariana Tohlukov: IESEG School of Management

No 2025004, LIDAM Reprints LFIN from Université catholique de Louvain, Louvain Finance (LFIN)

Abstract: In our decade-long international study of controversial publicly traded companies in tobacco, alcohol, and gambling industries, we find that their performance is distinctly influenced by the legal landscape compared to their non-controversial peers. Not only controversial firms do not outperform their non-controversial peers when the determinants of the legal landscape are accounted for, but there is also evidence that controversial firm performance is sensitive to specific aspects of the legal landscape, some of them helping them thrive while others penalizing them. A stricter rule of law and regulation quality negatively affect them. Their stock performance improves in environments with widespread bribery, patronage, and embezzlement. Additionally, enhanced business freedom and property rights protection significantly boost their performance, a benefit not observed in non-controversial firms.

Keywords: Controversial business; firm performance; legal determinants; business freedom; property rights; government integrity (search for similar items in EconPapers)
JEL-codes: G10 K20 (search for similar items in EconPapers)
Pages: 22
Date: 2025-01-01
Note: In: Economics, Management, and Financial Markets, 2024, vol. 19(2), p. 60-86
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Persistent link: https://EconPapers.repec.org/RePEc:ajf:louvlr:2025004

DOI: 10.22381/emfm19220244

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