Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/79607
Authors: 
Angelucci, Charles
Han, Martijn A.
Year of Publication: 
2012
Series/Report no.: 
SFB 649 Discussion Paper 2012-058
Abstract: 
This paper investigates the design of a leniency policy to fight corporate crime. We explicitly take into account the agency problem within the firm. We model this through a three-tier hierarchy: authority, shareholder, and manager. The manager may breach the law and report evidence to the authority. The shareholder writes the manager's incentive scheme, monitors him, and possibly reports evidence to the authority. Finally, the authority designs a sanctioning/leniency policy that deters corporate crime at the lowest possible cost. The authority designs its policy trying to both (i) exacerbate agency problems within non-compliant firms and (ii) alleviate agency problems within compliant firms. We find that depending on the authority's ability to punish the manager, the authority may wish to instigate a within-firm race to the courthouse. We also provide comparative statics, carry a welfare analysis and discuss policy implications.
Subjects: 
corporate crime
white-collar crime
leniency
compliance
antitrust
JEL: 
K21
K42
L40
Document Type: 
Working Paper

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