ABSTRACT. In our decade-long international study of controversial publicly traded companies in tobacco, alcohol, and gambling industries, we find that their performance is distinctly influenced by the legal landscape compared to their non-controversial peers. Not only controversial firms do not outperform their non-controversial peers when the determinants of the legal landscape are accounted for, but there is also evidence that controversial firm performance is sensitive to specific aspects of the legal landscape, some of them helping them thrive while others penalizing them. A stricter rule of law and regulation quality negatively affect them. Their stock performance improves in environments with widespread bribery, patronage, and embezzlement. Additionally, enhanced business freedom and property rights protection significantly boost their performance, a benefit not observed in non-controversial firms.
JEL codes: G10; K20

Keywords: controversial business; firm performance; legal determinants; business freedom; property rights; government integrity

How to cite: Mazza, P., Petitjean, M., and Tohlukov, A. (2024). “Financial Performance and The Legal Landscape: An International Study of Controversial Business Activities,” Economics, Management, and Financial Markets 19(2): 60–86. doi: 10.22381/emfm19220244.

Received 3 August 2023 • Received in revised form 4 September 2024
Accepted 5 September 2024 • Available online 15 September 2024