A number of authors have proposed that firms can internalize externalities through their shareholders. This paper investigates this proposition, focusing on public bads. Theoretically it is, indeed, possible that shareholders decide that the firm reduces its public bads at the cost of profits,...

The aim of auditing is to protect active and potential investors from accounting fraud. Nevertheless, as many auditing scandals have demonstrated, auditing has a dark side. Correct auditing is a public good provided by private auditing firms, but these firms are paid by the enterprise being...