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The Effect of EU Antitrust Investigations and Fines on a Firm?s Valuation

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  • Motta, Massimo
  • Langus, Gregor

Abstract

We estimate, using event study techniques, the impact of the main events in an antitrust investigation on a firm?s stock market value. A surprise inspection at the firm?s premises has a strong and statistically significant effect on the firm?s share price, with its cumulative average abnormal return being approximately -2%. Further, we find that a negative Decision by the European Commission results in a cumulative average abnormal return of about -3.3%. Overall, the fine accounts for a relatively small fraction of this loss in value. Finally, if the Court annuls or reduces the fine, this has a positive (+2%) effect on the firm?s valuation.

Suggested Citation

  • Motta, Massimo & Langus, Gregor, 2007. "The Effect of EU Antitrust Investigations and Fines on a Firm?s Valuation," CEPR Discussion Papers 6176, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:6176
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    More about this item

    Keywords

    Antitrust; Deterrence; Event studies; Fines;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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