Price-Fixing and Shareholder Returns: An Empirical Study

This paper examines the market reaction to three different events related to allegations of price‐fixing: the initial charges, the firm's plea, and the resolution of the case. Negative, risk‐adjusted shareholder returns are associated with the initial charge of price‐fixing, while mixed results...

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Bibliographic Details
Published in:The Financial review (Buffalo, N.Y.) N.Y.), 1990-02, Vol.25 (1), p.153-163
Main Authors: Skantz, Terrance R., Cloninger, Dale O., Strickland, Thomas H.
Format: Article
Language:English
Subjects:
Collusion
Disclosure
Expected returns
Price fixing
Shareholders equity
Statistical analysis
Stockholders
Studies
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Summary:This paper examines the market reaction to three different events related to allegations of price‐fixing: the initial charges, the firm's plea, and the resolution of the case. Negative, risk‐adjusted shareholder returns are associated with the initial charge of price‐fixing, while mixed results are observed during the two days immediately after the plea. The ultimate resolution of the case appears to be anticipated by the market. The overall decline in shareholder wealth from all three events combined is about 5 percent. These results suggest that shareholders are at least partial beneficiaries of price‐fixing and that the presumption of an agency problem may be incorrect.
ISSN:0732-8516
1540-6288
DOI:10.1111/j.1540-6288.1990.tb01294.x