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Economic Analysis and International Law

Marco Arnone and Leonardo S. Borlini

Corruption presents many legal and regulatory challenges, but these challenges cannot be met by the law in isolation. This book presents economic analysis of crime as an essential tool for shaping an effective legal apparatus. The authors contend that in order to assess whether and how to regulate corruption, it is necessary to start with a thorough inquiry into the causes, institutional and social effects, and most of all, actual and potential economic and financial consequences of crimes. This, they argue, should inform and help shape a balanced legal and regulatory approach to corruption.
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Chapter 5: The impact of corruption on shares' returns of euro-area listed industrial firms

Carlo Bellavite Pellegrini and Laura Pellegrini


This chapter illustrates an empirical analysis of the impact of corruption on the return of shares for a sample of 1,058 listed industrial companies belonging to the eurozone countries between 1996 and 2006. Bellavite Pellegrini (2008) uses an innovative method to measure the relevance of the impact of control variables on returns of European stocks since the introduction of the euro. This study shows that control variables like governance and productivity have a clear connection with the determinants of stock returns, even though they represent a second-best condition with respect to the importance of the state variables according to the Fama and French analysis (Arnone, Bellavite Pellegrini and Graziadei 2006). Moreover, the division of the sample into different portfolios, according to different levels of capitalization, highlights that control variables are definitely more important in portfolios with low-capitalization companies than in portfolios with highly-capitalized companies. The study suggests similar evidence for both productivity and governance. Low-capitalization companies' managers may influence aggregate productivity more intensively than managers of highly-capitalized companies.

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