The Reputational Penalties to Firms in Antitrust Investigations
نویسندگان
چکیده
We examines the legal penalties imposed on Dutch listed firms targeted by competition authorities from 1998-2008. By using event study techniques we estimate the impact of the main events in an antitrust investigation on a firm’s stock market value and analyse the causes of the value impacts. The first announcement of an antitrust investigation has a statistically significant effect on the firm’s share price, with a cumulative abnormal return being approximately -2.3%. This corresponds to a total value loss of €4.3 billion. Overall, the fines imposed by the legal system attribute only 12% of this total value loss. Another 40% of the total value loss is explained by the lost conspiracy-generated profits. We find that the residual 48% of the total value loss is explained by reputation loss. Thus, cartel offenders are disciplined largely through market-induced reputational penalties, not through legal penalties.
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