Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/333765 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 12219
Publisher: 
Munich Society for the Promotion of Economic Research - CESifo GmbH, Munich
Abstract: 
We show that credit constraints significantly increase the risk that firms are infiltrated by organized crime, defined as the covert involvement of criminal organizations in corporate decision-making. Using confidential data on criminal investigations, credit ratings, and loan histories for the universe of Italian firms, we find that a downgrade to substandard credit status reduces credit availability by 30% over five years and increases the probability of infiltration by 5%, relative to comparable firms. A local randomization design comparing firms just above and below the downgrade threshold confirms this result. The effect is pervasive across sectors and regions, but particularly strong in real estate, where the probability of infiltration rises by 10% following a downgrade. Infiltrated firms also display higher survival rates than other downgraded firms, despite similar declines in employment and revenues. These findings suggest that organized crime can serve as a financial backstop – sustaining non-viable businesses and potentially redirecting their strategies to serve criminal interests.
Subjects: 
organized crime
firms
bank credit
JEL: 
G32
K42
L25
O17
Document Type: 
Working Paper
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