Dale O. Cloninger

Perceived risk of punishment and the commission of homicides: A covariance structure analysis

Abstract If the behavior of potential murderers does in fact respond to the risk of punishment, it is the perceived risk rather than the ex post risk as measured by arrest rates, conviction rates, or execution rates. Previous empirical studies of homicide behavior have, by and large, ignored this distinction. The present paper accommodates this distinction by estimating a covariance structure model in which the perceived risk is treated as an endogenous latent variable, with two measures of sanctions as its indicators. Cross-section data are used for the estimation. One of the principal findings is that the homicide commission rate is significantly and negatively correlated with the perceived risk of punishment, which provides empirical support for the deterrence hypothesis (Ehrlich, 1975). The other principal findings are that the perceived risk of punishment is (a) significantly and negatively correlated with the homicide commission rate, and (b) significantly and positively correlated with police presence. The latter results provide empirical support for the resource saturation hypothesis (Fisher and Nagin, 1978).

Execution moratoriums, commutations and deterrence: the case of Illinois

In an earlier work the impact of an execution moratorium in Texas on the monthly returns (first differences) of homicides was investigated. That moratorium was judicially imposed pending the appeal of a death sentence that could have had widespread consequences. A similar methodology is applied to the state of Illinois. In January 2000, the Governor of Illinois declared a moratorium on executions pending a review of the judicial process that condemned certain murderers to the death penalty. In January 2003 just prior to leaving office, the Governor commuted the death sentences of all of those who then occupied death row. It is found that these actions are coincident with the increased risk of homicide incurred by the residents of Illinois over the 48 month post-event period for which data were available. The increased risk produced an estimated 150 additional homicides during the post-event period.

Capital punishment and deterrence: a portfolio approach

Econometric studies of the deterrence effect of capital punishment have developed models of the supply of criminal homicides which include a variable to measure the probability of capital punishment. The present study, in contrast, employs a portfolio approach in which a model is developed realting changes in the rate of homicides across states to changes in the rate of a portfolio of all reported criminal offences. The effects of executions on changes in homicide rates are measured by changes in the nature of the relationship between homicide and the portfolio and abnormal variations in the residual of a model developed in the absence of executions. Using data from 1983–1988 across states and the District of Columbia, both the nature of the relationship and the residual variation are found to be uniquely altered in a manner consistent with the deterrence hypothesis. The results of the present study provide insight into why some studies of capital punishment may have failed to find appropriate disturbance...

Corporate fraud, systematic risk, and shareholder enrichment

Abstract The impact of the disclosure of alleged illegal corporate activities together with the possible motives for their use increasingly has become the subject of research by financial scholars. These studies primarily analyze the disclosure’s effect on the market returns of the firm’s equity. The consensus of these studies is that the initial disclosure of alleged illegal corporate activities results in significant negative abnormal returns to the existing shareholders. The size of these abnormal returns generally exceeds the actual fines, fees and penalties that the firms eventually experience. The impact of these disclosures on systematic risk and their possible implications for managerial behavior and corporate policy have suffered from relative neglect. The present research seeks to establish what, if any, impact the disclosure of alleged corporate fraud has on systematic risk. Using the data set provided by Karpoff and Lott (1993, The reputational penalty firms bear from committing corporate fraud. J Law Econ , 34, 757–802), this research tests whether securities experience any significant beta shifts upon the initial disclosure of alleged corporate fraud. Empirical tests find evidence consistent with the theory that agents engage in illegal activity in an attempt to enhance share price. The empirical results also provide additional insight into the question of why corporations engage in criminal activity.

Violent crime and punishment: an application of the LISREL model

Public anxiety over violent crime has forged a broad consensus to purchase more crime control. Recently, the President brought into law a federal anti-crime bill that will put an additional 100 000 police on the nations streets. This paper presents empirical evidence on the deterrence effect of police presence. The principal finding is that police presence deters commission of violent crimes by increasing the risk of being punished for committing those crimes. This risk is modelled as a latent variable, because the probability and severity of punishment for committing a violent crime are generally communicated in an onconsistant fashion. The violent crime commission rate is also treated as a latent variable, because it is almost certainly afflicted with measurement error.

Intercity variations in the police use of lethal response

Abstract This paper develops and empirically tests a model of the intercity variation in the rate of lethal response (civilians killed by police in the line of duty). The empirically derived two stage least square regression models generally confirm the relationship between crime seriousness and police use of force found by Robert J. Friedrich. The empirical expressions in the present study explain nearly fifty percent of the intercity variation in the rate of lethal response and enjoy a high degree of statistical significance. Specifically, the statistical tests indicate that the rate of lethal response is significantly and positively related to the seriousness of the crime, the probability of arrest and conviction and the age distribution of the citys population. Furthermore, there appears to be no systematic relationship between the rate of lethal response and the rates of police killed by civilians and police per violent offense.

An Economic Analysis of Student-Reported Grading Errors.

The authors report on a study involving an objective test that was intentionally misscored on the copies of the examination returned to students. Upon being advised that there may have been errors made in the scoring of the papers and upon having been given the correct answers, students were asked to report errors. Not surprisingly, not all perceived errors were reported and the decision to report errors appeared to depend on whether or not the reporting was to the benefit of the student.

Reflections on a critique

Critiques of scholarly research contain their own flaws; sometimes even more so than the work they are critiquing. Such is the case of the critique of our research authored by John Donohue and Jason Wolfers. Published in the Stanford Law Review their paper avoided the blind peer review process and consequently contains elements that undoubtedly would not have survived peer review. That possibility aside, we show that their alternative measures of criminal activity have no theoretical basis nor any empirical precedent within the modified portfolio approach employed in our research. Putting even that aside, we show that their empirical results are not inconsistent with ours. Thus, upon reflection, we see no justification to amend, modify or otherwise alter our methods or results.

Returns on negative beta securities: implications for the empirical SML

Traditional textbook analysis either presumes or graphically depicts a monotonically positively sloped security market line (SML). Tests to empirically derive the SML also presume such a function. This paper argues that over the range of negative betas the SML is not positively sloped but negatively sloped. The SML over both negative and positive ranges, therefore, forms a ‘V’ shaped function with the point of the ‘V’ at a beta of zero and a return equal to the risk-free rate. Empirical tests confirm a negative sloped SML over the range of negative betas. The tests also indicate that the returns of negative beta securities equal or exceed those for their positive beta counterparts. Traditional theory suggests the returns of negative beta securities are less than the risk-free rate. The preliminary empirical analysis indicates otherwise.