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Busted! Now What? Effects of Cartel Enforcement on Firm Value and Corporate Policies

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  • Massa, Massimo
  • dong, aileen
  • Zaldokas, Alminas

Abstract

In a cross-country study we look at the staggered passage of national leniency laws over 1990-2012. We show that these laws lead to more convictions of cartels, and generally increase the costs of collusion by reducing the average gross margins of the affected firms. We further examine how changing costs of collusion shape firm boundaries and show that firms reorganize their activities by engaging in more horizontal acquisitions, both in the roles as the acquirer and the target. These acquisitions tend to be associated with higher announcement returns. We find little evidence of the increase in strategic alliances or greenfield investments.

Suggested Citation

  • Massa, Massimo & dong, aileen & Zaldokas, Alminas, 2016. "Busted! Now What? Effects of Cartel Enforcement on Firm Value and Corporate Policies," CEPR Discussion Papers 11470, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11470
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    Cited by:

    1. Ferrés, Daniel & Ormazabal, Gaizka & Povel, Paul & Sertsios, Giorgo, 2021. "Capital structure under collusion," Journal of Financial Intermediation, Elsevier, vol. 45(C).
    2. Bos, Iwan & Davies, Stephen & Harrington, Joseph E. & Ormosi, Peter L., 2018. "Does enforcement deter cartels? A tale of two tails," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 372-405.
    3. Catarina Marvão & Giancarlo Spagnolo, 2018. "Cartels and leniency: Taking stock of what we learnt," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume II, chapter 4, pages 57-90, Edward Elgar Publishing.
    4. Heim, Sven & Hüschelrath, Kai & Laitenberger, Ulrich & Spiegel, Yossi, 2017. "Minority share acquisitions and collusion: Evidence from the introduction of national leniency programs," ZEW Discussion Papers 17-037, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    Cartels; Leniency laws; Collusion; Firm boundaries; M&a;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • 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
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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