Organized Crime and Firms' Financial Statements: Evidence from Criminal Investigations in Italy
研究意大利有组织犯罪关联企业的财务报表特征，发现这类企业利润更低但销售额更高、劳动成本更低，且更易破产，证据表明犯罪关联通过洗钱等途径消耗企业资源。
ABSTRACT We investigate how connections to organized crime manifest on firms' financial statements and analyze the impact of these connections on firm performance outcomes. Using a unique dataset that identifies Italian firms connected to organized crime, we find that connected firms have lower profitability, even though they report higher sales and lower labor cost. Connected firms also have higher bank debt, report lower cash holdings, experience quicker operating cycles and are more likely to file for bankruptcy. Further, we find that connected firms are more tax aggressive and engage in downward earnings manipulation. To corroborate our results, we exploit an amendment to the Italian Anti-Money Laundering regulation as a shock to the extent to which criminal organizations could expropriate connected firms' resources through money laundering. Our collective evidence suggests that connections to organized crime can drain a firm's resources, possibly through money-laundering schemes, and jeopardize its existence, thereby harming its shareholders. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G31; G32; G38; K42; K49.