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


  • Langus, Gregor
  • Motta, Massimo


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

  • Langus, Gregor & Motta, Massimo, 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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    References listed on IDEAS

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    Cited by:

    1. Julien Sauvagnat, 2015. "Prosecution and Leniency Programs: The Role of Bluffing in Opening Investigations," Journal of Industrial Economics, Wiley Blackwell, vol. 63(2), pages 313-338, June.
    2. Dong, Ailin & Massa, Massimo & 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.
    3. Roland Königsgruber & David Windisch, 2014. "Does European Union policy making explain accounting choices? An empirical analysis of the effects of investigations by the Directorate General for Competition on accounting choices," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(3), pages 717-731, August.
    4. Dan Richards & Heng Yuan & Marcelo Bianconi, 2015. "Equity Prices and Cartel Activity," Discussion Papers Series, Department of Economics, Tufts University 0813, Department of Economics, Tufts University.
    5. Malay Biswas, 2017. "Are They Efficient in the Middle? Using Propensity Score Estimation for Modeling Middlemen in Indian Corporate Corruption," Journal of Business Ethics, Springer, vol. 141(3), pages 563-586, March.
    6. Zhou, Jun, 2011. "Evaluating Leniency with Missing Information on Undetected Cartels: Exploring Time-Varying Policy Impacts on Cartel Duration," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 353, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    7. Mats Bergman, 2008. "Quis Custodiet Ipsos Custodes? or Measuring and Evaluating the Effectiveness of Competition Enforcement," De Economist, Springer, vol. 156(4), pages 387-409, December.
    8. 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.
    9. Tim Reuter, 2017. "Endogenous Cartel Organization and Antitrust Fine Discrimination," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 51(3), pages 291-313, November.
    10. Mohamad Jamal Zeidan, 2012. "The effects of violating banking regulations on the financial performance of the US banking industry," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 20(1), pages 56-71, February.
    11. Vivek Ghosal & D. Daniel Sokol, 2016. "Policy Innovations, Political Preferences, and Cartel Prosecutions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 48(4), pages 405-432, June.
    12. Allain, Marie-Laure & Boyer, Marcel & Kotchoni, Rachidi & Ponssard, Jean-Pierre, 2015. "Are cartel fines optimal? Theory and evidence from the European Union," International Review of Law and Economics, Elsevier, vol. 42(C), pages 38-47.
    13. Mohamad Zeidan, 2013. "Effects of Illegal Behavior on the Financial Performance of US Banking Institutions," Journal of Business Ethics, Springer, vol. 112(2), pages 313-324, January.
    14. Klein, Gordon J. & Günster, Andrea, 2013. "Enforcement of European Competition Policy - Impact on Competition and Efficiency," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79989, Verein für Socialpolitik / German Economic Association.

    More about this item


    antitrust; deterrence; event studies; fines;

    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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