Stock price reaction to the risk of private antitrust litigation
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School of Business | Master's thesis
AbstractThe purpose of this thesis is to analyse the stock market reaction to the increased risk of private litigation in the EU based on damages caused by cartels. This this focuses on three research questions: 1. does the start of the EU Commission’s investigation and decision cause a negative stock price reaction? 2. Has the negative reaction to the Commission’s decision increased since the coming of force of the Damages Directive? 3. Is reaction more significant if the cartel member is domiciled in Germany, Netherlands or the UK? To answer the research questions, I have collected data from Commissions investigation and decisions from the Official Journal and stock prices of the cartel members during the estimation window and event window from Thomas Reuters Refinitiv. Altogether the sample contains stock price information from 166 companies for the event of the Commission’s decision and 77 stock price information on companies for the event of Dawn Raid. The sample collected is then divided between different subsamples based on domicile location and the date of the Commission’s decision. The estimation window used for the event study is 220 days that starts 250 days before the event and ends 30 days before the event. Different event windows are used for the result and to test their robustness. Finally, the event study results a regressed based on the domicile location of the cartel members and the date of the Commission’s decision. The results show that the market reaction to the start of the Commission’s investigation and decision is negative. The results do not show that the date the Commission’s decision was published influenced the market reaction to the decision. The results do indicate that the domicile location of the cartel member influences market reaction, but this result by itself does not prove that the risk of private litigation has changed the market reaction to the Commission’s decision. The results of this thesis do not support the conclusion that the increased risk of private litigation has increased the negative market reaction to public antitrust action.
Thesis advisorNyberg, Peter
event study, EU, private antitrust litigation, stock price