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Firm's damages from antitrust & abuse of dominant position investigations

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  • Fotis, Panagiotis

Abstract

Competition authorities carry out investigations and impose legal penalties on firms which are caught infringing the competition law. The rationale of this policy is to prevent firms from distorting free competition in a way that is detrimental to economic efficiency and at the same time to deter them from engaging in cartels and other anti-competitive behaviour. In this paper I try to evaluate the impact of major antitrust & abuse of dominant position investigations on firm’s financial value. For this purpose I divide the period of each investigation into two sub periods: the ‘Investigation period”, which begins from the outset of the anticompetitive case and ends when the competition authority issues the statement of objections to the infringed firms and the ‘Deterrence period’, which follows the ‘Investigation period’ and ends with the final judgment of the court. I use aggregate regression based approach to estimate the Average & Cumulative Average Residuals of the firms which infringe articles 1 & 2 of Greek Competition Law. The empirical results imply that the release of the final decisions of the Hellenic Competition Commission and the Court of Appeal negatively affect the share price of the infringed firms.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32788.

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Date of creation: 01 Jul 2011
Date of revision: 13 Aug 2011
Handle: RePEc:pra:mprapa:32788

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Keywords: Antitrust; competition policy; deterrence; anticompetitive practices; fines; time-series models; regression based approach; quantitative event study; marginal residuals;

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  1. Garbade, Kenneth D & Silber, William L & White, Lawrence J, 1982. "Market Reaction to the Filing of Antitrust Suits: An Aggregate and Cross-Sectional Analysis," The Review of Economics and Statistics, MIT Press, vol. 64(4), pages 686-91, November.
  2. Jan Bartholdy & Dennis Olson & Paula Peare, 2007. "Conducting Event Studies on a Small Stock Exchange," The European Journal of Finance, Taylor & Francis Journals, Taylor & Francis Journals, vol. 13(3), pages 227-252.
  3. Burns, Malcolm R, 1977. "The Competitive Effects of Trust-Busting: A Portfolio Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(4), pages 717-39, August.
  4. Arthur De Vany & Henry McMillan, 2004. "Was the Antitrust Action that Broke Up the Movie Studios Good for the Movies? Evidence from the Stock Market," American Law and Economics Review, Oxford University Press, Oxford University Press, vol. 6(1), pages 135-153.
  5. Maynes, Elizabeth & Rumsey, John, 1993. "Conducting event studies with thinly traded stocks," Journal of Banking & Finance, Elsevier, Elsevier, vol. 17(1), pages 145-157, February.
  6. Schwert, G William, 1981. "Using Financial Data to Measure Effects of Regulation," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 24(1), pages 121-58, April.
  7. Bizjak, John M & Coles, Jeffrey L, 1995. "The Effect of Private Antitrust Litigation on the Stock-Market Valuation of the Firm," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 436-61, June.
  8. Bosch, Jean-Claude & Eckard, E Woodrow, Jr, 1991. "The Profitability of Price Fixing: Evidence from Stock Market Reaction to Federal Indictments," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 309-17, May.
  9. Bittlingmayer, George & Hazlett, Thomas W., 2000. "DOS Kapital: Has antitrust action against Microsoft created value in the computer industry?," Journal of Financial Economics, Elsevier, Elsevier, vol. 55(3), pages 329-359, March.
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