The impact of European antitrust policy: Evidence from the stock market

We evaluate the impact of European antitrust policy by analyzing the stock market response to investigation announcements, infringement decisions, and appeals for 253 companies involved in 118 European antitrust cases over 1974–2004. We find significantly negative stock price responses of almost −5% around the dawn raid and −2% around the final decision, and a significantly positive response of up to 4% around a successful appeal. These numbers correspond to a total market value loss of €24 billion around the raid and the decision, of which roughly 75% cannot be explained by fines and legal costs. The stock market thus anticipates a decrease in profitability and reputational damage. The magnitude of the market response depends on the fine, infringement duration, and in particular firm size and media attention. Small firms suffer more from an infringement decision. Greater newspaper coverage is associated with a more pronounced response, suggesting the importance of reputational effects.