The Effect of EU Antitrust Investigations and Fines on a Firm's Valuation |
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| Authors: | Luca Aguzzoni Gregor Langus Massimo Motta |
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| Institution: | 1. LEAR, , Rome, Italy;2. CRA International, , London, England;3. ICREA‐Universitat Pompeu Fabra and Barcelona Graduate School of Economics, , E‐08005 Barcelona, Spain |
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| Abstract: | EU antitrust investigations involve a sequence of events which affect the investigated firm's market value. We model these relationships and estimate their impact on firms' share prices. On average, a surprise inspection reduces a firm's share price by 2.89%, an infringement decision reduces it by 3.57%. The Court judgments do not have a statistically significant effect. Overall, we find that the total effect of the antitrust action ranges from ?3.03% to ?4.55% of a firm's market value. Fines account for no more than 8.9% of this loss, and we conjecture that most of the loss is due to the cessation of illegal activities. |
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