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Competition Laws, Governance, and Firm Value

Author

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  • Ross Levine
  • Chen Lin
  • Wensi Xie

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.

Suggested Citation

  • Ross Levine & Chen Lin & Wensi Xie, 2021. "Competition Laws, Governance, and Firm Value," NBER Working Papers 28908, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28908
    Note: CF IFM IO LE
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    Cited by:

    1. Xede, James & Simon Peter Dak-Adzaklo, Cephas & Ofosu, Emmanuel & Wise Dodzidenu Adza, Solomon, 2023. "Competition laws, external financing and investment," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 82(C).

    More about this item

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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