The Cost of Wrongdoing to Bystander Firms

IF 1.4 3区 社会学 Q2 INTERNATIONAL RELATIONS Business and Politics Pub Date : 2023-05-11 DOI:10.1017/bap.2023.8
Min-Jung Lee, Mina Lee, Seunghyup Lee
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Abstract

We argue that a taken-for-granted category gives way to a new category when strategic behavior becomes stigmatized. As a result, even bystander firms that have engaged in similar strategic behavior, such as lobbying, will be penalized by their association with the culpable strategic behavior. The extent of their association with the culpable behavior will determine the level of punishment they receive. However, if a trustworthy third party administers a corrective measure, the affected firms can regain their lost legitimacy. The extent of their restoration is proportional to the amount of legitimacy that was lost. We provide empirical evidence for this argument by analyzing the Jack Abramoff case, one of the most notorious corrupt lobbying cases in US history. We find that bystander firms were penalized by shareholders when the corrupt lobbying was revealed. Furthermore, the penalty was more severe for bystander firms that engaged in more lobbying activities and hired more revolving-door lobbyists. We also find that the subsequent legal remedy helped the bystander firms that were penalized the most to recover the most from their losses. We confirm the theoretical notion using the Enron case as well.
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旁观者公司的不法行为成本
我们认为,当战略行为被污名化时,一个理所当然的类别会让位于一个新的类别。因此,即使是从事类似战略行为(如游说)的旁观者公司,也会因与有罪战略行为的关联而受到惩罚。他们与有罪行为的关联程度将决定他们受到的惩罚程度。然而,如果一个值得信赖的第三方管理纠正措施,受影响的公司可以恢复其失去的合法性。他们恢复的程度与失去的合法性成正比。我们通过分析美国历史上最臭名昭著的腐败游说案之一杰克·阿布拉莫夫案,为这一论点提供了经验证据。我们发现,当腐败的游说行为被揭露时,旁观者公司受到股东的惩罚。此外,参与更多游说活动、雇佣更多游说者的旁观公司受到的惩罚更为严厉。我们还发现,随后的法律救济帮助受惩罚最严重的旁观者公司从损失中获得最大的补偿。我们也用安然案证实了这一理论概念。
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来源期刊
Business and Politics
Business and Politics Social Sciences-Political Science and International Relations
CiteScore
3.60
自引率
16.70%
发文量
25
期刊介绍: Business and Politics solicits articles within the broad area of the interaction between firms and political actors. Two specific areas are of particular interest to the journal. The first concerns the use of non-market corporate strategy. These efforts include internal organizational design decisions as well as external strategies. Internal organizational design refers to management structure, sourcing decisions, and transnational organization with respect to the firm"s non-market environment. External strategies include legal tactics, testimony, lobbying and other means to influence policy makers at all levels of government and international institutions as an adjunct to market strategies of the firm.
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