Competition Laws, Governance, and Firm Value

46 Pages Posted: 14 Jun 2021 Last revised: 18 Nov 2021

See all articles by Ross Levine

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Wensi Xie

The Chinese University of Hong Kong (CUHK) - CUHK Business School

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Date Written: June 2021

Abstract

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.

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Suggested Citation

Levine, Ross Eric and Lin, Chen and Xie, Wensi, Competition Laws, Governance, and Firm Value (June 2021). Available at SSRN: https://ssrn.com/abstract=3866341 or http://dx.doi.org/10.2139/ssrn.3866341

Ross Eric Levine (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

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Berkeley, CA 94720
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National Bureau of Economic Research (NBER)

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Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Wensi Xie

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
Hong Kong

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