After the fall: Stock price movements and the deterrent effect of antitrust enforcement

In this paper, we utilize data on stock price movements of firms indicted o n price-fixing charges to infer expectations of antitrust recidivism. Speci fically, a return of the firm's (market-adjusted) asset value to its pre-in dictment level in the post-indictment period is taken as evidence of stockh olders' expectations of a return to collusive behavior. From these data, we are able to make direct inferences about the effectiveness of antitrust en forcement actions. Importantly, we find that the stock prices of 85 percent of the firms in our sample had regained 100 percent of their pre-indictmen t levels within one year of the antitrust action. Such widespread and rapid stock price appreciation casts doubt on the durability of the deterrent ef fect of Section 1 enforcement.