Abstract
We study the effects of cartel participation on top corporate managers. Although a strong public interest exists in regulating price fixing, we find little evidence that either corporate governance or the legal system holds managers of cartel firms accountable. Instead, managers of cartel firms enjoy greater job security, receive higher cash bonuses, and more aggressively take profits from appreciated stock option awards. Legal sanctions against individual managers are infrequent, with enforcement actions focused on corporations rather than their officers. Managers seem to use concealment strategies actively to limit detection of cartel membership by their boards and auditors.
| Original language | English |
|---|---|
| Pages (from-to) | 4813-4840 |
| Number of pages | 28 |
| Journal | Management Science |
| Volume | 65 |
| Issue number | 10 |
| DOIs | |
| Publication status | Published - Oct 2019 |
Funding
The authors thank two anonymous referees, Tim Adam, Martin Bugeja, Mike Burkhart, John Core, Ettore Croci, Daniel Ferreira, Paul Gilgen, William Greene, Robert Guerrero, John Hund, Simi Kedia, Peter Limbach, Daniel Metzger, Alexandra Niessen-Ruenzi, Shiva Rajgopal, Daniel Sokol, Suraj Srinivasan (the editor), Felix von Meyerinck, and seminar participants at Catholic University of Milan, Cyprus University of Technology, University of Melbourne, New York University, UT Austin, University of Queensland, University of Technology Sydney, Warwick Business School, University of Western Australia, the Edinburgh Corporate Finance Conference, the Swiss Finance Association Meeting in Zurich, and the German Finance Association Meeting in Wuppertal for helpful comments and suggestions; John Connor for generously providing his extensive Private International Cartel data set of worldwide cartels; and Ronald Masulis for generously providing his data set of foreign independent directors. Part of this research was completed when David Yermack was a visiting professor at Erasmus University Rotterdam and Tanja Artiga González and Markus Schmid were visiting researchers at NYU Stern School of Business. A research stay made possible by the Swiss National Science Foundation and the German Academic Exchange Service is gratefully acknowledged.
Keywords
- Cartels
- Corporate governance
- Executive compensation
- Price fixing
