Download This PaperThe Effects of Global Leniency Programs on Margins and Mergers
INSEAD Working Paper No. 2017/75/FIN
Finance Down Under 2016 Building on the Best from the Cellars of Finance
65 Pages Posted: 9 Apr 2014 Last revised: 16 May 2019
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The Effects of Global Leniency Programs on Margins and Mergers
Busted! Now What? Effects of Cartel Enforcement on Firm Value and Corporate Policies
Date Written: November 21, 2017
Abstract
In a cross-country study, we investigate how staggered passage of national leniency programs from 1990-2012 has affected firms’ margins and merger activity. We find that these programs, which give amnesty to cartel conspirators that cooperate with antitrust authorities, reduced the gross margins of the affected firms. However, firms reacted to new regulations by engaging in more mergers that had negative effects on downstream firms. Our results imply that although these programs were generally effective, their full potential was mitigated by mergers that substitute for cartels, and that a strong merger review process might be a prerequisite for strengthening anti-collusion enforcement.
Keywords: collusion, leniency laws, margins, mergers
JEL Classification: D33, D43, G34, G38
Suggested Citation: Suggested Citation
Massimo Massa
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