NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Ruoke Yang

Imperial College Business School
5.09A, 53 Prince's Gate
South Kensington Campus
London, Lond SW7 2AZ
United Kingdom

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Imperial College

NBER Working Papers and Publications

March 2020Measuring the Cost of Regulation: A Text-Based Approach
with Charles W. Calomiris, Harry Mamaysky: w26856
We derive a measure of firm-level regulatory costs from the text of corporate earnings calls. We then use this measure to study the effect of regulation on companies’ operating fundamentals and cost of capital. We find that higher regulatory cost results in slower sales growth, an effect which is mitigated for large firms. Furthermore, we find a one-standard deviation increase in our preferred measure of regulatory cost is associated with an increase in firms’ cost of capital of close to 3% per year. These findings suggest that regulatory risk is a major cost to firms, but the largest firms are able to manage that risk better.
 
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