2018 - Working Papers: Managerial Economics

We address the growing concern that minority shareholding (MS) in rival firms may facilitate collusion, using the introduction of national leniency programs (LPs) as a shock that destabilizes collusive agreements and study their effect on MS acquisitions. Based on data from 63 countries, we find a large and significant increase in horizontal MS acquisitions in the year in which an LP is introduced, but only in countries with effective antitrust enforcement and low levels of corruption. Our findings suggest that firms use MS acquisitions to either stabilize collusive agreements or soften competition in the event that collusion breaks down.