The Effect of EU Antitrust Investigations and Fines on a Firm's Valuation
34 Pages Posted: 20 May 2008
Date Written: March 2007
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.
Keywords: Antitrust, deterrence, event studies, fines
JEL Classification: K21, K42, L4
Suggested Citation: Suggested Citation
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