IDEAS home Printed from https://ideas.repec.org/a/taf/ijecbs/v13y2006i2p229-245.html
   My bibliography  Save this article

Event Studies and the Analysis of Antitrust

Author

Listed:
  • Michael Cichello
  • Douglas Lamdin

Abstract

A standard tool in economics and finance is the event study in which one examines the impact of an event on stock returns. While hundreds of such studies have been published, the concern here is with a small subset: the use of event studies to examine antitrust issues. After a brief review of the event study technique, we provide a review of the literature that is the nexus of event studies and antitrust. The goal is to not only chronicle the development of this literature and highlight the major findings, but also to comment on important issues concerning implementation of this research method and the interpretation of the results.

Suggested Citation

  • 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.
    • Handle: RePEc:taf:ijecbs:v:13:y:2006:i:2:p:229-245
    DOI: 10.1080/13571510600784557
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/10.1080/13571510600784557
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13571510600784557?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. McAfee, R. Preston & Williams, Michael A., 1988. "Can event studies detect anticompetitive mergers?," Economics Letters, Elsevier, vol. 28(2), pages 199-203.
    2. Thomas W. Gilligan, 1986. "The Competitive Effects of Resale Price Maintenance," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 544-556, Winter.
    3. 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, vol. 85(3), pages 436-461, June.
    4. Bittlingmayer, George, 1992. "Stock Returns, Real Activity, and the Trust Question," Journal of Finance, American Finance Association, vol. 47(5), pages 1701-1730, December.
    5. Pin-Huang Chou, 2004. "Bootstrap Tests for Multivariate Event Studies," Review of Quantitative Finance and Accounting, Springer, vol. 23(3), pages 275-290, November.
    6. Jonathan B. Baker, 2003. "The Case for Antitrust Enforcement," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 27-50, Fall.
    7. Larcker, David F. & Gordon, Lawrence A. & Pinches, George E., 1980. "Testing for Market Efficiency: A Comparison of the Cumulative Average Residual Methodology and Intervention Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(2), pages 267-287, June.
    8. John J. Binder, 1985. "Measuring the Effects of Regulation with Stock Price Data," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 167-183, Summer.
    9. Eckbo, B. Espen, 1983. "Horizontal mergers, collusion, and stockholder wealth," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 241-273, April.
    10. Huth, William L & MacDonald, Don N, 1989. "The Impact of Antitrust Litigation on Shareholder Return," Journal of Industrial Economics, Wiley Blackwell, vol. 37(4), pages 411-426, June.
    11. Frederick Warren-Boulton & Serdar Dalkir, 2001. "Staples and Office Depot: An Event-Probability Case Study," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 19(4), pages 467-479, December.
    12. Sanjai Bhagat & Roberta Romano, 2002. "Event Studies and the Law: Part I: Technique and Corporate Litigation," American Law and Economics Review, American Law and Economics Association, vol. 4(1), pages 141-168, January.
    13. Boardman, Anthony & Vertinsky, Ilan & Whistler, Diana, 1997. "Using information diffusion models to estimate the impacts of regulatory events on publicly traded firms," Journal of Public Economics, Elsevier, vol. 63(2), pages 283-300, January.
    14. Daniel Hosken & John David Simpson, 2001. "Have Supermarket Mergers Raised Prices? An Event Study Analysis," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(3), pages 329-342.
    15. Eckbo, B Espen & Wier, Peggy, 1985. "Antimerger Policy under the Hart-Scott-Rodino Act: A Reexamination of the Market Power Hypothesis," Journal of Law and Economics, University of Chicago Press, vol. 28(1), pages 119-149, April.
    16. 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 309-317, May.
    17. 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.
    18. McWilliams, Abagail & Turk, Thomas A & Zardkoohi, Asghar, 1993. "Antitrust Policy and Mergers: The Wealth Effect of Supreme Court Decisions," Economic Inquiry, Western Economic Association International, vol. 31(4), pages 517-533, October.
    19. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
    20. Eckbo, B Espen & Maksimovic, Vojislav & Williams, Joseph, 1990. "Consistent Estimation of Cross-Sectional Models in Event Studies," The Review of Financial Studies, Society for Financial Studies, vol. 3(3), pages 343-365.
    21. Scott E. Hein, 2004. "Improving Tests of Abnormal Returns by Bootstrapping the Multivariate Regression Model with Event Parameters," Journal of Financial Econometrics, Oxford University Press, vol. 2(3), pages 451-471.
    22. Fee, C. Edward & Thomas, Shawn, 2004. "Sources of gains in horizontal mergers: evidence from customer, supplier, and rival firms," Journal of Financial Economics, Elsevier, vol. 74(3), pages 423-460, December.
    23. Lamdin, Douglas J., 2001. "Implementing and interpreting event studies of regulatory changes," Journal of Economics and Business, Elsevier, vol. 53(2-3), pages 171-183.
    24. Burns, Malcolm R, 1983. "An Empirical Analysis of Stockholder Injury under Section 2 of the Sherman Act," Journal of Industrial Economics, Wiley Blackwell, vol. 31(4), pages 333-362, June.
    25. 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, American Law and Economics Association, vol. 6(1), pages 135-153.
    26. Robert W. Crandall & Clifford Winston, 2005. "Does antitrust policy improve consumer welfare? Assessing the evidence," Chapters, in: Colin Robinson (ed.), Governments, Competition and Utility Regulation, chapter 2, Edward Elgar Publishing.
    27. Shahrur, Husayn, 2005. "Industry structure and horizontal takeovers: Analysis of wealth effects on rivals, suppliers, and corporate customers," Journal of Financial Economics, Elsevier, vol. 76(1), pages 61-98, April.
    28. Hersch, Philip L, 1994. "The Effects of Resale Price Maintenance on Shareholder Wealth: The Consequences of Schwegmann," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 205-216, June.
    29. Brady, Una & M. Feinberg, Robert, 2000. "An examination of stock-price effects of EU merger control policy," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 885-900, August.
    30. Bittlingmayer, George & Hazlett, Thomas W., 2000. "DOS Kapital: Has antitrust action against Microsoft created value in the computer industry?," Journal of Financial Economics, Elsevier, vol. 55(3), pages 329-359, March.
    31. Ajeyo Banerjee & E. Woodrow Eckard, 1998. "Are Mega-Mergers Anticompetitive? Evidence from the First Great Merger Wave," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 803-827, Winter.
    32. Stillman, Robert, 1983. "Examining antitrust policy towards horizontal mergers," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 225-240, April.
    33. James S. Ang & Shaojun Zhang, 2004. "An Evaluation of Testing Procedures for Long Horizon Event Studies," Review of Quantitative Finance and Accounting, Springer, vol. 23(3), pages 251-274, November.
    34. John Thompson & David Kaserman, 2001. "After The Fall: Stock Price Movements and the Deterrent Effect of Antitrust Enforcement," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 19(3), pages 329-334, November.
    35. Sanjai Bhagat & Roberta Romano, 2002. "Event Studies and the Law: Part II: Empirical Studies of Corporate Law," American Law and Economics Review, American Law and Economics Association, vol. 4(2), pages 380-423.
    36. Ellert, James C, 1976. "Mergers, Antitrust Law Enforcement and Stockholder Returns," Journal of Finance, American Finance Association, vol. 31(2), pages 715-732, May.
    37. George L. Mullin & Joseph C. Mullin & Wallace P. Mullin, 1995. "The Competitive Effects of Mergers: Stock Market Evidence from the U.S. Steel Dissolution Suit," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 314-330, Summer.
    38. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    39. Sanjai Bhagat & Roberta Romano, "undated". "Event Studies and the Law: Part II--Empirical Studies and Corporate Law," Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy Working Paper Series yale_lepp-1019, Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy.
    40. Karafiath, Imre, 1988. "Using Dummy Variables in the Event Methodology," The Financial Review, Eastern Finance Association, vol. 23(3), pages 351-357, August.
    41. Robin A. Prager, 1992. "The Effects of Horizontal Mergers on Competition: The Case of the Northern Securities Company," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 123-133, Spring.
    42. Sanjai Bhagat & Roberta Romano, "undated". "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.
    43. Burns, Malcolm R, 1977. "The Competitive Effects of Trust-Busting: A Portfolio Analysis," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 717-739, August.
    44. 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 686-691, November.
    45. Binder, John J, 1988. "The Sherman Antitrust Act and the Railroad Cartels," Journal of Law and Economics, University of Chicago Press, vol. 31(2), pages 443-468, October.
    46. Singal, Vijay, 1996. "Airline Mergers and Competition: An Integration of Stock and Product Price Effects," The Journal of Business, University of Chicago Press, vol. 69(2), pages 233-268, April.
    47. Eckbo, B Espen, 1992. "Mergers and the Value of Antitrust Deterrence," Journal of Finance, American Finance Association, vol. 47(3), pages 1005-1029, July.
    48. Aktas, Nihat & de Bodt, Eric & Roll, Richard, 2004. "Market Response to European Regulation of Business Combinations," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(4), pages 731-757, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. George Ford & John Jackson & Sarah Skinner, 2010. "HAC standard errors and the event study methodology: a cautionary note," Applied Economics Letters, Taylor & Francis Journals, vol. 17(12), pages 1153-1156.
    2. Steve Janner & Daniel Schmidt, 2015. "Are economically significant bond returns explained by corporate news? An examination of the German corporate bond market," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 29(3), pages 271-298, August.
    3. Som Sekhar Bhattacharyya & Praveen Nemana, 2024. "Effect of Demonetization on Advertising, Research & Development and Human Resource Intensities and its Impact on Firm’s Performance," Vision, , vol. 28(3), pages 361-373, June.
    4. Ching-Ching Chen & Kuo-Hao Lin & Tsai-Hsuan Tsai & Hsiu-Jung Tsai, 2024. "Impact of D&O Insurance on Shareholder Wealth During Financial Restatement Announcements: An Empirical Study in Taiwan," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 14(6), pages 1-2.
    5. Ralph M. Sonenshine, 2009. "Effect of Research and Development and Market Concentration on Merger Outcomes -- An Event Study of U.S. Horizontal Mergers," Working Papers 2009-16 JEL classificatio, American University, Department of Economics.
    6. Henryk Gurgul & Milena Suliga & Tomasz Wojtowicz, 2012. "Responses of the Warsaw Stock Exchange to the U.S. macroeconomic data announcements," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 12, pages 41-59.
    7. Haji Ali Beigi, Maryam & Budzinski, Oliver, 2012. "On the use of event studies to evaluate economic policy decisions: A note of caution," Ilmenau Economics Discussion Papers 80, Ilmenau University of Technology, Institute of Economics.
    8. Darren Filson & Saman Olfati & Fatos Radoniqi, 2015. "Evaluating Mergers in the Presence of Dynamic Competition Using Impacts on Rivals," Journal of Law and Economics, University of Chicago Press, vol. 58(4).
    9. Panagiotis Fotis & Michael Polemis & Nikolaos Zevgolis, 2011. "Robust Event Studies for Derogation from Suspension of Concentrations in Greece during the Period 1995–2008," Journal of Industry, Competition and Trade, Springer, vol. 11(1), pages 67-89, March.
    10. Alcalde, Nuria & Powell, Ronan, 2022. "Government intervention in European mergers and acquisitions," The North American Journal of Economics and Finance, Elsevier, vol. 61(C).
    11. John Kwoka & Chengyan Gu, 2015. "Predicting Merger Outcomes: The Accuracy of Stock Market Event Studies, Market Structure Characteristics, and Agency Decisions," Journal of Law and Economics, University of Chicago Press, vol. 58(3).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Günster, Andrea & van Dijk, Mathijs, 2016. "The impact of European antitrust policy: Evidence from the stock market," International Review of Law and Economics, Elsevier, vol. 46(C), pages 20-33.
    2. Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin B., 2011. "How effective is European merger control?," European Economic Review, Elsevier, vol. 55(7), pages 980-1006.
    3. Tomaso Duso & Klaus Gugler & Burcin Yurtoglu, 2005. "EU Merger Remedies: A Preliminary Empirical Assessment," CIG Working Papers SP II 2005-16, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    4. Svetlana B. Avdasheva & Dina V. Tsytsulina, 2014. "The Effects Of Competition Policy: Merger Approval, Entry Barrier Removal, Antitrust Enforcement Compared," HSE Working papers WP BRP 34/FE/2014, National Research University Higher School of Economics.
    5. Tomaso Duso & Klaus Gugler & Florian Szücs, 2013. "An Empirical Assessment of the 2004 EU Merger Policy Reform," Economic Journal, Royal Economic Society, vol. 123(11), pages 596-619, November.
    6. Atkas, Nihat & Bodt, Eric de & Roll, Richard, 2001. "Market Response to European Regulation," University of California at Los Angeles, Anderson Graduate School of Management qt0qc9p8gf, Anderson Graduate School of Management, UCLA.
    7. Sven‐Olof Fridolfsson & Johan Stennek, 2010. "Industry Concentration and Welfare: On the Use of Stock Market Evidence from Horizontal Mergers," Economica, London School of Economics and Political Science, vol. 77(308), pages 734-750, October.
    8. Daniel Martin Katz & Michael J Bommarito II & Tyler Soellinger & James Ming Chen, 2015. "Law on the Market? Abnormal Stock Returns and Supreme Court Decision-Making," Papers 1508.05751, arXiv.org, revised May 2017.
    9. Gao, Ning & Peng, Ni & Strong, Norman, 2017. "What determines horizontal merger antitrust case selection?," Journal of Corporate Finance, Elsevier, vol. 46(C), pages 51-76.
    10. John Kwoka & Chengyan Gu, 2015. "Predicting Merger Outcomes: The Accuracy of Stock Market Event Studies, Market Structure Characteristics, and Agency Decisions," Journal of Law and Economics, University of Chicago Press, vol. 58(3).
    11. Gao, Ning & Peng, Ni & Zhang, Yi, 2021. "Distributive inefficiency in horizontal mergers: Evidence from wealth transfers between merging firms and their customers," International Review of Financial Analysis, Elsevier, vol. 78(C).
    12. Ralph M. Sonenshine, 2009. "Effect of Research and Development and Market Concentration on Merger Outcomes -- An Event Study of U.S. Horizontal Mergers," Working Papers 2009-16 JEL classificatio, American University, Department of Economics.
    13. John Jackson & Audrey Kline & Sarah Skinner, 2006. "The Impact of Non-Normality and Misspecification on Merger Event Studies," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 13(2), pages 247-264.
    14. Shahrur, Husayn, 2005. "Industry structure and horizontal takeovers: Analysis of wealth effects on rivals, suppliers, and corporate customers," Journal of Financial Economics, Elsevier, vol. 76(1), pages 61-98, April.
    15. Carletti, Elena & Hartmann, Philipp & Ongena, Steven, 2015. "The economic impact of merger control legislation," International Review of Law and Economics, Elsevier, vol. 42(C), pages 88-104.
    16. Dirk Hackbarth & Bart Taub, 2022. "Does the Potential to Merge Reduce Competition?," Management Science, INFORMS, vol. 68(7), pages 5364-5383, July.
    17. Kimmel, Randall K. & Antenucci, Robert & Hasan, Shahriar, 2017. "Investor perception and business method patents: A natural experiment," Economic Analysis and Policy, Elsevier, vol. 54(C), pages 26-48.
    18. Avdasheva, Svetlana & Tsytsulina, Dina, 2015. "The effects of M&As in highly concentrated domestic vis-à-vis export markets: By the example of Russian metal industries," Research in International Business and Finance, Elsevier, vol. 34(C), pages 368-382.
    19. Gokhale, Jayendra & Brooks, Raymond M. & Tremblay, Victor J., 2014. "The effect on stockholder wealth of product recalls and government action: The case of Toyota's accelerator pedal recall," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(4), pages 521-528.
    20. 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.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:ijecbs:v:13:y:2006:i:2:p:229-245. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CIJB20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.