DP6176 The Effect of EU Antitrust Investigations and Fines on a Firm?s Valuation

Author(s): Gregor Langus, Massimo Motta
Publication Date: March 2007
Keyword(s): antitrust, deterrence, event studies, fines
JEL(s): K21, K42, L4
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6176

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.