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

46 Pages Posted: 30 Apr 2010 Last revised: 21 Jun 2011

See all articles by Andrea Günster

Andrea Günster

Maastricht University - Department of Organization & Strategy; ZHAW School of Management and Law

Mathijs A. van Dijk

Erasmus University Rotterdam (EUR)

Date Written: 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.

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

JEL Classification: L40, K21, G14

Suggested Citation

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

Andrea Günster (Contact Author)

Maastricht University - Department of Organization & Strategy ( email )

P.O. Box 616
Maastricht, Limburg 6200MD
Netherlands

ZHAW School of Management and Law ( email )

Theaterstrasse 17
Winterthur, 8401
Switzerland
+41589347946 (Phone)

HOME PAGE: http://https://www.zhaw.ch/en/about-us/person/gues/

Mathijs A. Van Dijk

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

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