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The Effect of EU Antitrust Investigations and Fines on a Firm's Valuation
Author(s) -
Aguzzoni Luca,
Langus Gregor,
Motta Massimo
Publication year - 2013
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12016
Subject(s) - valuation (finance) , surprise , economics , microeconomics , value (mathematics) , monetary economics , business , finance , statistics , psychology , social psychology , mathematics
EU antitrust investigations involve a sequence of events which affect the investigated firm's market value. We model these relationships and estimate their impact on firms' share prices. On average, a surprise inspection reduces a firm's share price by 2.89%, an infringement decision reduces it by 3.57%. The C ourt judgments do not have a statistically significant effect. Overall, we find that the total effect of the antitrust action ranges from −3.03% to −4.55% of a firm's market value. Fines account for no more than 8.9% of this loss, and we conjecture that most of the loss is due to the cessation of illegal activities.