Abstract

http://ssrn.com/abstract=1598387
 
 

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The Impact of European Antitrust Policy: Evidence from the Stock Market


Andrea Günster


ETH Zürich - Center for Law & Economics; Maastricht University - Department of Organization & Strategy

Mathijs A. Van Dijk


Erasmus University - Rotterdam School of Management; Erasmus Research Institute of Management (ERIM)

June 20, 2011


Abstract:     
We evaluate the impact of European antitrust policy by analyzing the stock market response to investigation announcements, infringement decisions, and appeals. We examine a sample of 253 companies involved in 118 European antitrust cases over the period 1974-2004. We uncover significantly negative stock price responses of almost -5% around the dawn raid and 2% around the final decision, and a significantly positive response of up to 4% around a successful appeal. These numbers correspond to a total market value loss of €24 billion around the raid and the decision, of which roughly 75% cannot be explained by fines and legal costs. The stock market thus anticipates a significant decrease in future profitability as a result of European antitrust action. The magnitude of the stock market response depends on the fine, the duration of the infringement, and in particular the size of the firm and media attention. Small firms suffer more from an infringement decision than large firms. Greater newspaper coverage is associated with a more pronounced response, which suggests an important role for reputational effects.

Number of Pages in PDF File: 46

Keywords: Antitrust, Competition Policy, European Commission, Event Study

JEL Classification: L40, K21, G14

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Date posted: April 30, 2010 ; Last revised: June 21, 2011

Suggested Citation

Günster, Andrea and Van Dijk, Mathijs A., The Impact of European Antitrust Policy: Evidence from the Stock Market (June 20, 2011). Available at SSRN: http://ssrn.com/abstract=1598387 or http://dx.doi.org/10.2139/ssrn.1598387

Contact Information

Andrea Günster (Contact Author)
ETH Zürich - Center for Law & Economics ( email )
Haldeneggsteig 4
CH-8092 Zurich
Switzerland
+41-44-632-6063 (Phone)
+41-44-632-1097 (Fax)
HOME PAGE: http://www.lawecon.ethz.ch/people/guenster
Maastricht University - Department of Organization & Strategy ( email )
P.O. Box 616
Maastricht, 6200MD
Netherlands
Mathijs A. Van Dijk
Erasmus University - Rotterdam School of Management ( email )
P.O. Box 1738
Rotterdam, 3000 DR
Netherlands
+31 10 408 1124 (Phone)
+31 10 408 9017 (Fax)
HOME PAGE: http://mathijsavandijk.com/
Erasmus Research Institute of Management (ERIM)
P.O. Box 1738
3000 DR Rotterdam
Netherlands
Feedback to SSRN


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