Professor of Finance
Collusion; Leniency Laws; Firm Boundaries; Mergers and Acquisitions; JEL classification; D22; D43; G34; G38;
Busted! Now What? Effects of Cartel Enforcement on M&A (Revision 1 )
Authors: Massa Massimo
In a cross-country study, the authors investigate how the increasing costs of collusion shape firm boundaries and affect firm acquisitions by examining the staggered passage of national leniency laws from 1990-2012. These laws, giving amnesty to cartel conspirators that cooperate with antitrust authorities, lead to more cartel convictions, and have generally increased the costs of collusion by reducing the average gross margins of the affected firms.They find that firms react to new restrictive regulations by engaging in more acquisitions, especially horizontal ones. These acquisitions have negative effects for the downstream firms suggesting that mergers substitute cartel activity.