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Price-Fixing and Shareholder Returns: An Empirical Study

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  • Skantz, Terrance R
  • Cloninger, Dale O
  • Strickland, Thomas H

Abstract

This paper examines the market reaction to three different events related to allegations of price-fixing: the initial charges, the firm's plea, and the resolution of the case. Negative, risk-adjusted shareholder returns are associated with the initial charge of price-fixing, while mixed results are observed during the two days immediately after the plea. The ultimate resolution of the case appears to be anticipated by the market. The overall decline in shareholder wealth from all three events combined is about 5 percent. These results suggest that shareholders are at least partial beneficiaries of price-fixing and that the presumption of an agency problem may be incorrect. Copyright 1990 by MIT Press.

Suggested Citation

  • Skantz, Terrance R & Cloninger, Dale O & Strickland, Thomas H, 1990. "Price-Fixing and Shareholder Returns: An Empirical Study," The Financial Review, Eastern Finance Association, vol. 25(1), pages 153-163, February.
    • Handle: RePEc:bla:finrev:v:25:y:1990:i:1:p:153-63
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    Cited by:

    1. Xingnan Jiang, 2018. "Operational risk and its impact on North American and British banks," Applied Economics, Taylor & Francis Journals, vol. 50(8), pages 920-933, February.
    2. Nadine Gatzert & Joan T. Schmit & Andreas Kolb, 2016. "Assessing the Risks of Insuring Reputation Risk," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(3), pages 641-679, September.
    3. Oskar Kowalewski, 2012. "Corporate Governance and Pension Fund Performance," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 6(1), March.
    4. Gillet, Roland & Hübner, Georges & Plunus, Séverine, 2010. "Operational risk and reputation in the financial industry," Journal of Banking & Finance, Elsevier, vol. 34(1), pages 224-235, January.
    5. Poitras, Geoffrey, 1994. "Shareholder wealth maximization, business ethics and social responsibility," MPRA Paper 113221, University Library of Munich, Germany.

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