Competition Laws, Governance, and Firm Value

Ross Levine (), Chen Lin and Wensi Xie

No 28908, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Do antitrust laws influence corporate valuations? We evaluate the relationship between firm value and laws limiting firms from engaging in anticompetitive agreements, abusing dominant positions, and conducting M&As that restrict competition. Using firm-level data from 99 countries over the 1990-2010 period, we discover that valuations rise after countries strengthen competition laws. The effects are larger among firms with more severe pre-existing agency problems: firms in countries with weaker investor protection laws, with weaker firm-specific governance provisions, and with greater opacity. The results suggest that antitrust laws that intensify competition exert a positive influence on valuations by reducing agency problems.

JEL-codes: G3 K21 K22 L4 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-com and nep-ind
Note: CF IFM IO LE
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