Does Appellate Precedent Matter? Stock Price Responses to Appellate Court Decisions of FCC Actions

Empirical Legal Analysis: Assessing the Performance of Legal Institutions, 2013

37 Pages Posted: 14 Jul 2011 Last revised: 7 Mar 2018

See all articles by Daniel L. Chen

Daniel L. Chen

Directeur de Recherche, Centre National de la Recherche Scientifique, Toulouse School of Economics, Institute for Advanced Study in Toulouse, University of Toulouse Capitole, Toulouse, France

Date Written: May 1, 2012

Abstract

This study tests the effects of federal appellate court decisions of Federal Communications Commission (FCC) actions on stock prices using differences-in-differences (DID) and an instrumental variables approach. This study exploits the random assignment of appellate judges to three-judge panels and the fact that a judge’s (1) party affiliation and (2) race predict outcomes in appellate court decisions of FCC actions to instrument for anti-industry decisions, which favor the public interest. This instrumental variables approach demonstrates a causal relationship between appellate court decisions of FCC actions and changes in stock prices of media firms relative to the stock prices of non-media firms.

The differences-in-differences (DID) analysis shows that federal appellate court decisions against media businesses decreased media stock prices. The instrumental variables analysis shows that these appellate court decisions decreased media stock prices relative to non-media stock prices, one and two years after the court decisions. Recent studies indicate that stock prices serve as a proxy for competition and that decreased media competition may correspond to an increase in variety of programming. These findings suggest that when deciding against media businesses, the courts effectively reinforced the purpose of the FCC to serve the public interest by promoting a diversity of viewpoints.

Keywords: Court, Stock, Price, FCC

Suggested Citation

Chen, Daniel L., Does Appellate Precedent Matter? Stock Price Responses to Appellate Court Decisions of FCC Actions (May 1, 2012). Empirical Legal Analysis: Assessing the Performance of Legal Institutions, 2013. Available at SSRN: https://ssrn.com/abstract=1884413 or http://dx.doi.org/10.2139/ssrn.1884413

Daniel L. Chen (Contact Author)

Directeur de Recherche, Centre National de la Recherche Scientifique, Toulouse School of Economics, Institute for Advanced Study in Toulouse, University of Toulouse Capitole, Toulouse, France ( email )

21 allée de Brienne
31015 Toulouse cedex 6 France
Toulouse, 31015
France

Register to save articles to
your library

Register

Paper statistics

Downloads
13
Abstract Views
109
PlumX Metrics