Equity Prices and Cartel Activity

Dan Richards, Heng Yuan and Marcelo Bianconi

No 813, Discussion Papers Series, Department of Economics, Tufts University from Department of Economics, Tufts University

Abstract: We use an event study method to determine the impact of announced cartel activity on equity prices. Unlike prior research, we employ the Fama-French (1993) three-factor model to estimate normal event-window returns. The announcement that a firm is under investigation for price-fixing has a long-lasting negative impact on stock prices of nearly two percent in magnitude. This effect however seems to vanish for those firms receiving leniency for early confession. We further find that the extra profit lost from ending the cartel may plausibly explain the equity fall.

Keywords: Event Study; Equity Prices; Cartels (search for similar items in EconPapers)
JEL-codes: G14 L4 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-com, nep-fmk and nep-ind
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Persistent link: https://EconPapers.repec.org/RePEc:tuf:tuftec:0813

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