Measuring the Cost of Regulation: A Text-Based Approach

Charles Calomiris, Harry Mamaysky and Ruoke Yang

No 26856, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We derive a measure of firm-level regulatory exposure from the text of corporate earnings calls. We use this measure to study the effect of regulation on companies’ growth, leverage, profitability, and equity returns. Higher regulatory exposure results in slower sales and asset growth, lower leverage, reduced profitability, but higher post-call equity returns. These effects are mitigated for larger firms. Our findings suggest that both compliance risk and physical operational cost are consequences of increased regulation, but the magnitude of the effects of compliance risk are larger. The topical context of regulation is important for future firm-level outcomes.

JEL-codes: G18 G38 K2 L51 (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-law, nep-reg and nep-rmg
Note: CF EFG IO LE POL
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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