Multinational enterprises evade state regulations and conceal criminal financial transactions by fragmenting legal structures in foreign subsidiaries, shell companies, or conduits. Research indicates states' regulatory efforts find an unexpected helping hand from global markets themselves. News of criminal behaviors generate harsh reputational penalties for implicated companies on global financial markets. Markets would thus perform a regulatory function and behave as a kind of "global civil society". However, market agents differ from civil society actors because they are moved by mere profit-seeking reasons. It is not clear whether they cope with fragmentation of legal structures by penalizing a parent company for its subsidiaries' misconduct. I fill this gap and advance two opposite arguments. First, a "conductor hypothesis" claiming that markets recognize and penalize a parent entity for crimes involving its subsidiaries. Second, an "insulator hypothesis" claiming that parent companies insulate themselves from the penalties imposed by markets on their subsidiaries. I test these arguments in the case of corporate bribery scandals. I use an original dataset on unexpected scandals of corruption to estimate the effect of a subsidiary's involvement in a scandal on stock prices of the parent company. My event-study design retrieves causal estimates by imputing synthetic daily stock price counterfactuals. I illustrate my mechanism qualitatively, with a case study of two scandals involving the Italian state-owned oil company Eni SpA. I find evidence in favor of the "insulator hypothesis". Results indicate a failure of state regulatory action and show the limits of the regulatory function performed by financial markets.