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Equity Prices and Cartel Activity

Author

Listed:
  • Dan Richards
  • Heng Yuan
  • Marcelo Bianconi

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.

Suggested Citation

  • Dan Richards & Heng Yuan & Marcelo Bianconi, 2015. "Equity Prices and Cartel Activity," Discussion Papers Series, Department of Economics, Tufts University 0813, Department of Economics, Tufts University.
    • Handle: RePEc:tuf:tuftec:0813
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    File URL: http://ase.tufts.edu/economics/documents/papers/2015/bianconiRichardsEquityPrices.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Event Study; Equity Prices; Cartels;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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