Legality rating and corporate efficiency: evidence from a conditional nonparametric frontier analysis

Unlocking the Power of Ethical Governance: The rising importance of policies promoting legality and ethics in contemporary societies. Government, as a driving force, plays a pivotal role in fostering economic development and countering illegal practices and unfair competition. The revelation of firms’ official information regarding their legal, fiscal, and ethical standings is crucial in interactions with consumers, investors, and public institutions. It serves as a powerful antidote to problems like adverse selection, free-riding, and moral hazard, ultimately leading to more stable markets and improved economic landscapes.

Intriguingly, this dynamic has the potential to curb criminal activities in the economy and encourage companies to embrace legal, fiscal, and ethical practices. But is there a trade-off between legality and a company’s efficiency? Delve into the heart of this question, crucial for understanding firms’ strategic choices. Motivations range from profit-seeking, even through tax evasion, to fierce competition among companies. When some opt for non-compliance with legal standards, others may face heightened competition, potentially pushing them out of the market or compelling them to resort to similar illicit strategies. Join us on a quest to explore the intricate balance between legality, ethics, and business efficiency in the modern world.

For more information, please access the following link:https://link.springer.com/article/10.1007/s00181-023-02511-w

This paper is published in Empirical Economics

Authors: Marco A. De Benedetto, Michele G. Giuranno, Camilla Mastromarco, Diego Ravenda, Pierluigi Toma