Working Paper: CEPR ID: DP6176
Authors: Gregor Langus; Massimo Motta
Abstract: We estimate, using event study techniques, the impact of the main events in an antitrust investigation on a firm?s stock market value. A surprise inspection at the firm?s premises has a strong and statistically significant effect on the firm?s share price, with its cumulative average abnormal return being approximately -2%. Further, we find that a negative Decision by the European Commission results in a cumulative average abnormal return of about -3.3%. Overall, the fine accounts for a relatively small fraction of this loss in value. Finally, if the Court annuls or reduces the fine, this has a positive (+2%) effect on the firm?s valuation.
Keywords: Antitrust; Deterrence; Event Studies; Fines
JEL Codes: K21; K42; L4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Dawn raid (Y60) | Firms' share prices (G32) |
| Negative decision by European Commission (L49) | Firms' share prices (G32) |
| Court annuls or reduces fine (K41) | Firms' share prices (G32) |