THE EFFECT OF PRIVATE ANTITRUST LITIGATION ON THE STOCK-MARKET VALUATION OF THE FIRM

We study the implications for shareholder wealth of interfirm antitrus t litigation and how the costs of the dispute affect the propensity to settle. Upon filing, defendants experience significant wealth losses that are ten million dollars larger than the wealth gains of plaintiff s. Financial distress, behavioral constraints, and follow-on suits are sources of wealth leakage and influence settlement behavior. Since th e threat of a monetary transfer has little power to explain either wea lth effects of the likelihood of settlement, the central concern of de fendants may be the potential prohibition of profitable business pract ices.