Evaluating risks-based communities of Mafia companies: a complex networks perspective

Nicola Giuseppe Castellano (), Roy Cerqueti and Bruno Maria Franceschetti
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Nicola Giuseppe Castellano: University of Pisa
Roy Cerqueti: Sapienza University of Rome
Bruno Maria Franceschetti: University of Macerata

Review of Quantitative Finance and Accounting, 2021, vol. 57, issue 4, No 11, 1463-1486

Abstract: Abstract This paper presents a data-driven complex network approach, to show similarities and differences—in terms of financial risks—between the companies involved in organized crime businesses and those who are not. At this aim, we construct and explore two networks under the assumption that highly connected companies hold similar financial risk profiles of large entity. Companies risk profiles are captured by a statistically consistent overall risk indicator, which is obtained by suitably aggregating four financial risk ratios. The community structures of the networks are analyzed under a statistical perspective, by implementing a rank-size analysis and by investigating the features of their distributions through entropic comparisons. The theoretical model is empirically validated through a high quality dataset of Italian companies. Results highlights remarkable differences between the considered sets of companies, with a higher heterogeneity and a general higher risk profiles in companies traceable back to a crime organization environment.

Keywords: Companies financial risk indicator; Organized crime; Complex networks; Clustering coefficient; Entropy; Rank-size analysis (search for similar items in EconPapers)
JEL-codes: C18 C63 M19 M49 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:kap:rqfnac:v:57:y:2021:i:4:d:10.1007_s11156-021-00984-3

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DOI: 10.1007/s11156-021-00984-3

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