The Day after the Scandal [Part two]. An Empirical Evidence on Liability Action and Reputational Risk

Abstract

This paper consists of an empirical analysis, successive to Part 1 (Rangone, 2023), concerning the correlation between the execution of a liability action and the increase of potential negative effects from a reputational point of view that undermine the company’s stability. The cases of application of the liability action and those which have adopted the arbitration clause as a term of comparison have been defined on a population of 428 Italian unlisted joint-stock companies. The technique of Chi-Square was used to avoid empirical evidence being determined by chance. The findings demonstrate the substantial correlation between the adoption of the arbitration clause – replacing the liability action against directors – and the reduction of cases of reputational problems regardless of their causes.