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

We study the importance of discretion in antitrust enforcement by analyzing the response of asset prices to the sudden accession of Theodore Roosevelt to the presidency. During McKinley’s term in office the largest wave of merger activity in American history occurred, and his administration did not attempt to use antitrust laws to restrain any of those mergers. His vice president, Theodore Roosevelt, was known to be a Progressive reformer and much more interested in controlling anticompetitive behavior. We find that firms with greater vulnerability to antitrust enforcement saw greater declines in their abnormal returns following McKinley’s assassination. The transition from McKinley to Roosevelt caused one of the most significant changes in antitrust enforcement of the Gilded Age—not from new legislation, but from a change in the approach taken to the enforcement of existing law. Our results highlight the importance of enforcement efforts in antitrust.