INDUSTRY IMPACT OF CARTELS: EVIDENCE FROM THE STOCK MARKET1

Abstract

This paper conducts an event study analysis to empirically assess the industry-wide impact of cartels. Using a sample of recent European cartel cases, we estimate the effect of the surprise inspection and final decision on the stock market value of cartel and noncartel firms. The overall effect of both events is negative for cartel members and statistically insignificant for noncartel members. However, the impact of the inspection is significantly negative for European noncartel suppliers and for noncartel suppliers in nonchemicals industries. This is consistent with the theory that cartels can create additional damages through positively affecting the performance of their competitors.