Thursday, December 6, 2012
Michael G. Faure and Laarni Escresa (University of Maastricht - Faculty of Law, Metro and University of Hamburg - Institute of Law and Economics) has posted Social Stigma (Production of Legal Rules, Cheltenham: Edward Elgar, 2011, 205-227) on SSRN. Here is the abstract:
This is a chapter in a volume on the production of legal rules discussing the importance of social stigma and reputation. On the one hand the literature on social norms is discussed, explaining how, from an economic perspective, stigma can be inflicted through the use of the criminal law. Hence, the social process of stigmatization is described, explaining also how stigma depends on the number of individuals that may be stigmatized and the number of people that imposed the stigma. In addition, legal aspects of criminal sanctions are discussed, in the sense that the question is addressed to what extent a criminal conviction leads to reputational losses or to, as it is often refer to “naming and shaming”. Based on an overview of literature it is shown that these reputational effects (measured by decreases in stock prices of convicted corporations) often occur when the crimes affect parties with whom the corporation stands in a contractional relationship (like employees of customers); however, crimes that rather affect third parties (like the environment) do not seem have a significant reputational effect (at least measured in reduction of stock price).