Competition Laws, Governance, and Firm Value
45 Pages Posted: 1 Jun 2021 Last revised: 23 Jun 2021
Date Written: May 31, 2021
Do antitrust laws influence corporate valuations? We evaluate the relationship between firm value and laws limiting firms from engaging in anticompetitive agreements, abusing dominant positions, and conducting M&As that restrict competition. Using firm-level data from 99 countries over the 1990-2010 period, we discover that valuations rise after countries strengthen competition laws. The effects are larger among firms with more severe pre-existing agency problems: firms in countries with weaker investor protection laws, with weaker firm-specific governance provisions, and with greater opacity. The results suggest that antitrust laws that intensify competition exert a positive influence on valuations by reducing agency problems.
Keywords: Antitrust, Governance, Valuation, Law and Finance
JEL Classification: K21, L4, G3, K22
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