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Law Change in a Regulated Sector Impacts Other Regulated Sectors: Evidence from Brazil

Felipe Filgueiras, Elias Cavalcante-Filho, Rodrigo de Losso, José Roberto Savoia
Authors registered in the RePEc Author Service: Rodrigo De-Losso

No 2019_27, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: This paper shows that a change in systematic risk of a regulated sector affects the regulatory environment by changing also the systematic risk of other sectors not directly affected by the intervention. We consider the Provisional Act. no. 579/2012 (PA 579) aimed at reducing power fees for Brazilian consumers. However, it has led to other consequences, including uncertainties about the rules for renewals of existing concessions. The analysis of systematic risk uses time-varying betas from 140 companies listed on the Brazilian Stock Market between January 2008 and September 2016. Based on both synthetic control and Dif-in-Dif methodologies, we conclude that the PA 579 increased the systemic risk not only of the sector it regulates, but also of other regulated sector in Brazil, suggesting a contagion effect on the country's regulatory environment.

Keywords: Finance; Provisional Act; Contagion effect; Regulation; Regulatory impact (search for similar items in EconPapers)
JEL-codes: G11 G14 G18 (search for similar items in EconPapers)
Date: 2019-07-30
New Economics Papers: this item is included in nep-ore
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