The Effects of Global Leniency Programs on Margins and Mergers

65 Pages Posted: 9 Apr 2014 Last revised: 16 May 2019

See all articles by Ailin Dong

Ailin Dong

Hong Kong University of Science & Technology (HKUST) - Department of Finance

Massimo Massa

INSEAD - Finance

Alminas Zaldokas

Hong Kong University of Science & Technology (HKUST) - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: November 21, 2017

Abstract

In a cross-country study, we investigate how staggered passage of national leniency programs from 1990-2012 has affected firms’ margins and merger activity. We find that these programs, which give amnesty to cartel conspirators that cooperate with antitrust authorities, reduced the gross margins of the affected firms. However, firms reacted to new regulations by engaging in more mergers that had negative effects on downstream firms. Our results imply that although these programs were generally effective, their full potential was mitigated by mergers that substitute for cartels, and that a strong merger review process might be a prerequisite for strengthening anti-collusion enforcement.

Keywords: collusion, leniency laws, margins, mergers

JEL Classification: D33, D43, G34, G38

Suggested Citation

Dong, Ailin and Massa, Massimo and Zaldokas, Alminas, The Effects of Global Leniency Programs on Margins and Mergers (November 21, 2017). INSEAD Working Paper No. 2017/75/FIN; Finance Down Under 2016 Building on the Best from the Cellars of Finance; Paris December 2015 Finance Meeting EUROFIDAI - AFFI. Available at SSRN: https://ssrn.com/abstract=2422200 or http://dx.doi.org/10.2139/ssrn.2422200

Ailin Dong

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

Alminas Zaldokas (Contact Author)

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong

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