Political Discretion and Antitrust Policy: Evidence from the Assassination of President McKinley

We analyze the response of asset prices to the assassination of President William McKinley in 1901. During his term in office, the largest wave of merger activity in American history occurred, yet McKinley did not attempt to enforce the Sherman Act against the firms. By contrast, his vice president, Theodore Roosevelt, was known to be interested in restraining corporate combinations. We find that firms that had engaged in mergers saw greater declines in their abnormal returns following McKinley’s assassination. We also study the market’s response to the first antitrust suit initiated by Roosevelt once he took office and find similar patterns, which confirms the importance of antitrust enforcement in the response of asset prices. Roosevelt’s accession caused a significant change in the approach to antitrust, not from new legislation but from more aggressive enforcement of existing law.