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.