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The Effect of Private Antitrust Litigation on the Stock-Market Valuation of the Firm

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  • Bizjak, John M
  • Coles, Jeffrey L

Abstract

The authors study the implications for shareholder wealth of interfirm antitrust litigation and how the costs of the dispute affect the propensity to settle. Upon filing, defendants experience significant wealth losses that are ten million dollars larger than the wealth gains of plaintiffs. Financial distress, behavioral constraints, and follow-on suits are sources of wealth leakage and influence settlement behavior. Since the threat of a monetary transfer has little power to explain either wealth effects or the likelihood of settlement, the central concern of defendants may be the potential prohibition of profitable business practices. Copyright 1995 by American Economic Association.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 85 (1995)
Issue (Month): 3 (June)
Pages: 436-61

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Handle: RePEc:aea:aecrev:v:85:y:1995:i:3:p:436-61

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Cited by:
  1. Sanjai Bhagat & Roberta Romano, . "Event Studies and the Law--Part I: Technique and Corporate Litigation," Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy Working Paper Series yale_lepp-1021, Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy.
  2. Yuming Fu & Stephen Ching, 2001. "Examining Competition in Land Market: An Application of Event Study to Land Auctions in Hong Kong," Wisconsin-Madison CULER working papers 01-01, University of Wisconsin Center for Urban Land Economic Research.
  3. Fotis, Panagiotis, 2011. "Firm's damages from antitrust & abuse of dominant position investigations," MPRA Paper 32788, University Library of Munich, Germany, revised 13 Aug 2011.
  4. Tim Reuter, 2012. "Private antitrust enforcement revisited: The role of private incentives to report evidence to the antitrust authority," Working Paper Series of the Department of Economics, University of Konstanz 2012-04, Department of Economics, University of Konstanz.
  5. Gianmaria Martini & Cinzia Rovesti, 2004. "Antitrust policy and price collusion. Public agencies vs delegation," Recherches économiques de Louvain, De Boeck Université, vol. 70(2), pages 127-151.
  6. Sanjai Bhagat & Roberta Romano, 2001. "Event Studies and the Law - Part I: Technique and Corporate Litigation," Yale School of Management Working Papers amz2475, Yale School of Management, revised 01 Jan 2002.
  7. Langus, Gregor & Motta, Massimo, 2007. "The Effect of EU Antitrust Investigations and Fines on a Firm’s Valuation," CEPR Discussion Papers 6176, C.E.P.R. Discussion Papers.
  8. Michael Cichello & Douglas Lamdin, 2006. "Event Studies and the Analysis of Antitrust," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 13(2), pages 229-245.

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