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Discussion Paper Details

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Title: The Effect of EU Antitrust Investigations and Fines on a Firm?s Valuation

Author(s): Gregor Langus and Massimo Motta

Publication Date: March 2007

Keyword(s): antitrust, deterrence, event studies and fines

Programme Area(s): Industrial Organization

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.

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Bibliographic Reference

Langus, G and Motta, M. 2007. 'The Effect of EU Antitrust Investigations and Fines on a Firm?s Valuation'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6176