Competition law reform and firm performance: Evidence from developing countries

We examine the effects of competition laws on firm performance in East Asian countries that have enacted antitrust legislation in the last three decades. Exploiting the staggered changes of these laws as quasi-exogenous shocks, we find that strengthened competition laws improve firm per-formance. Treated firms increase R & D investments and efficiency in inventory and asset man-agement, while free cash flow decreases after reforms. Also, the effect of competition laws on firm performance is stronger with weaker corporate governance. Our findings indicate that govern-ment intervention promoting competitive market environments could benefit corporate owners in emerging markets where corporate governance is often substandard.