Title: Market reaction to the European antitrust investigations in the payment card industry

Authors: Francesca Battaglia; Lucia Leonelli; Ornella Ricci

Addresses: Department of Management Studies and Quantitative Methods, University of Naples Parthenope, Via Generale Parisi 13, 80132 Naples, Italy ' School of Economics, University of Rome 'Tor Vergata', Via Columbia 2, 00133 Rome, Italy ' Department of Business Studies, University of Rome III, Via Silvio D'Amico 77, 00145 Rome, Italy

Abstract: This paper aims to analyse the stock price reaction of European banks involved in antitrust authority interventions regarding the payment card business. The main objective is to assess whether market discipline is effective and able to complement regulation (Berger et al., 2000) despite the opacity of the business (Morgan, 2002). To this end, we collect all interventions made by both domestic antitrust authorities and by the European Commission to investigate and/or sanction anticompetitive behaviour in the payment card sector over the period 2004-2015. This results in a sample of 24 events, involving 135 listed banks operating in the EU-27 area. We run an event study analysis based on a traditional market model in order to estimate cumulated abnormal returns (CARs), considering both the date when the formal investigation is open and the date when the outcome of the procedure is communicated to the market. Our findings provide weak evidence in favour of the effectiveness of market discipline, with a significant (negative) market reaction only for investigations involving a small number of well-identified banking institutions, while procedures involving large banking associations or payment networks do not generate any relevant reaction.

Keywords: payments market; payment cards; interchange fees; merchant; cardholders; event study; fines; antitrust authority.

DOI: 10.1504/IJBAAF.2020.107949

International Journal of Banking, Accounting and Finance, 2020 Vol.11 No.3, pp.361 - 384

Received: 29 Jan 2018
Accepted: 10 Nov 2018

Published online: 05 Apr 2020 *

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