Working Paper: NBER ID: w25237
Authors: Richard B. Baker; Carola Frydman; Eric Hilt
Abstract: We study the importance of discretion in antitrust enforcement by analyzing the response of asset prices to the sudden accession of Theodore Roosevelt to the presidency. During McKinley’s term in office the largest wave of merger activity in American history occurred, and his administration did not attempt to use antitrust laws to restrain any of those mergers. His vice president, Theodore Roosevelt, was known to be a Progressive reformer and much more interested in controlling anticompetitive behavior. We find that firms with greater vulnerability to antitrust enforcement saw greater declines in their abnormal returns following McKinley’s assassination. The transition from McKinley to Roosevelt caused one of the most significant changes in antitrust enforcement of the Gilded Age—not from new legislation, but from a change in the approach taken to the enforcement of existing law. Our results highlight the importance of enforcement efforts in antitrust.
Keywords: Political Discretion; Antitrust Policy; Market Reactions; Presidential Assassination
JEL Codes: N11; N21; N31; N41; N81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Transition from McKinley to Roosevelt (N11) | Shift in antitrust policy (L49) |
| McKinley’s assassination (N11) | Decline in stock prices for vulnerable firms (G32) |
| Firms involved in recent mergers (G34) | Greater declines in abnormal returns following McKinley’s assassination (N11) |
| Roosevelt's first antitrust suit (L49) | Lower abnormal returns for perceived targets (G17) |
| Political discretion (D72) | Impact on antitrust enforcement and firm valuations (L49) |