Anti-Mafia Law Enforcement and Lending in Mafia Lands. Evidence from Judicial Administration in Italy

Abstract

The paper analyses the impact of a preventive measure aimed at fighting the criminal organizations’ activities on the bank-firm relationship in the four Italian regions with the highest density of mafia over the period 2004–2016. Taking advantage of the staggered firm-level anti-mafia enforcement actions, we implement a difference-in-differences approach and find that after entering judicial administration mafia-infiltrated firms experience a 19 per cent contraction of bank credit and have a higher probability of being credit rationed than a matched sample of legal companies. We also find that firms confiscated from the mafia experience a negative change in some demand-driven (value of production) and supply-driven (profitability) determinants of loans. Finally, we study whether confiscation of infiltrated firms produces externalities on non-infiltrated companies, and show that banks do not reassess the overall credit risk in local markets.

Closed for mafia: Evidence from the removal of mafia firms on commercial property values

“…However, since criminal organizations act illegally and tend to hide their operations, we use an indirect measurement of mafia infiltration proxying its empirical manifestation by removing mafia firms from the market. Our research also adds to the recent literature on the impact of economic‐oriented antimafia policies (F. Calamunci & Drago, 2020; F. Calamunci et al, 2021; Ferrante, Fontana, et al, 2021; Ferrante, Reito, et al 2021; Operti, 2018). Although it is widely recognized that asset reallocation may be beneficial from a socioeconomic perspective (Esposito & Ricci, 2015), the economic literature has focused primarily on the assessment of antimafia measures with political or punitive content.…”

“…However, since criminal organizations act illegally and tend to hide their operations, we use an indirect measurement of mafia infiltration proxying its empirical manifestation by removing mafia firms from the market. Our research also adds to the recent literature on the impact of economic-oriented antimafia policies (F. Calamunci & Drago, 2020;F. Calamunci et al, 2021;Ferrante, Fontana, et al, 2021;Operti, 2018).…”

Public governance and firm total factor productivity: Evidence from a quasi‐natural event in China

“…Second, the weakness of law enforcement is one of the core causes of the rise and development of GEs (Acemoglu et al, 2020). In the illegal markets, the criminal organizations can often be regarded as the equivalent of the policy-maker (Anderson, 1995), and therefore, in the absence of a well-functioning government, weakening criminal organizations may create an institutional vacuum that increases uncertainty (Calamunci et al, 2021;Operti, 2018). 8 The detailed document can be seen at: http://sxllzy.shanxify.gov.cn/article/detail/2022/04/id/6644549.shtml.…”

“…Also, the news that a protective umbrella is investigated would engender greater uncertainty. Second, in the illegal markets, the criminal organizations can often be regarded as the equivalent of the policy‐maker (Anderson, 1995) and therefore, in the absence of a well‐functioning government, weakening criminal organizations may create an institutional vacuum that increases uncertainty (Calamunci et al., 2021; Operti, 2018). The third type of uncertainty relates to the shocks to market competition as criminal organizations may enforce cartels (Anderson, 1995; Slutzky & Zeume, 2020).…”