After The Fall: Stock Price Movements and the Deterrent Effect of Antitrust Enforcement

After The Fall: Stock Price Movements and the Deterrent Effect of Antitrust Enforcement In this paper, we utilize data on stock price movements of firms indicted on price-fixing charges to infer expectations of antitrust recidivism. Specifically, a return of the firm's (market-adjusted) asset value to its pre-indictment level in the post-indictment period is taken as evidence of stockholders' expectations of a return to collusive behavior. From these data, we are able to make direct inferences about the effectiveness of antitrust enforcement actions. Importantly, we find that the stock prices of 85 percent of the firms in our sample had regained 100 percent of their pre-indictment levels within one year of the antitrust action. Such widespread and rapid stock price appreciation casts doubt on the durability of thedeterrent effect of Section 1 enforcement. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

After The Fall: Stock Price Movements and the Deterrent Effect of Antitrust Enforcement

Loading next page...
 
/lp/springer_journal/after-the-fall-stock-price-movements-and-the-deterrent-effect-of-Y6IHfOvutR
Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2001 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1011851917409
Publisher site
See Article on Publisher Site

Abstract

In this paper, we utilize data on stock price movements of firms indicted on price-fixing charges to infer expectations of antitrust recidivism. Specifically, a return of the firm's (market-adjusted) asset value to its pre-indictment level in the post-indictment period is taken as evidence of stockholders' expectations of a return to collusive behavior. From these data, we are able to make direct inferences about the effectiveness of antitrust enforcement actions. Importantly, we find that the stock prices of 85 percent of the firms in our sample had regained 100 percent of their pre-indictment levels within one year of the antitrust action. Such widespread and rapid stock price appreciation casts doubt on the durability of thedeterrent effect of Section 1 enforcement.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 3, 2004

References

  • The Effect of Firm Organizational Structure on Incentives to Engage in Price Fixing
    Joyce, J. M.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve Freelancer

DeepDyve Pro

Price
FREE
$49/month

$360/year
Save searches from
Google Scholar,
PubMed
Create lists to
organize your research
Export lists, citations
Read DeepDyve articles
Abstract access only
Unlimited access to over
18 million full-text articles
Print
20 pages/month
PDF Discount
20% off