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Does Price Fixing Benefit Corporate Managers?

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  • Tanja Artiga González

    (School of Business and Economics, Vrije Universiteit Amsterdam, 1081 HV Amsterdam, Netherlands)

  • Markus Schmid

    (Swiss Institute of Banking and Finance, University of St. Gallen, CH-9000 St. Gallen, Switzerland)

  • David Yermack

    (Stern School of Business, New York University, New York, New York 10003; European Corporate Governance Institute, 1000 Brussels, Belgium; National Bureau of Economic Research, Cambridge, Massachusetts 02138)

Abstract

We study the effects of cartel participation on top corporate managers. Although a strong public interest exists in regulating price fixing, we find little evidence that either corporate governance or the legal system holds managers of cartel firms accountable. Instead, managers of cartel firms enjoy greater job security, receive higher cash bonuses, and more aggressively take profits from appreciated stock option awards. Legal sanctions against individual managers are infrequent, with enforcement actions focused on corporations rather than their officers. Managers seem to use concealment strategies actively to limit detection of cartel membership by their boards and auditors.

Suggested Citation

  • Tanja Artiga González & Markus Schmid & David Yermack, 2019. "Does Price Fixing Benefit Corporate Managers?," Management Science, INFORMS, vol. 65(10), pages 4813-4840, October.
    • Handle: RePEc:inm:ormnsc:v:65:y:2019:i:10:p:4813-4840
    DOI: 10.1287/mnsc.2018.3130
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    More about this item

    Keywords

    price fixing; cartels corporate governance; executive compensation;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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