Assessing impact of regulatory risk on shareholders' wealth

Research indicates that regulatory risk increases required return on investment by investors and causes underinvestment in industries with high sunk costs. The effects of regulatory changes may be measured by estimating the abnormal returns associated with the event. The results may suggest to regul...

Full description

Saved in:
Bibliographic Details
Published inApplied economics Vol. 49; no. 2; pp. 202 - 212
Main Author Angeles, Joseph Emmanuel Lukban
Format Journal Article
LanguageEnglish
Published London Routledge 01.01.2017
Taylor & Francis Ltd
Subjects
Abnormal returns
Court decisions
Economic models
fixed effects regression
Nationalization
Philippines
Regulation of financial institutions
regulatory impact assessment
Regulatory risk
Shareholders wealth
Stockholders
Online AccessGet full text

Cover

More Information
Summary:Research indicates that regulatory risk increases required return on investment by investors and causes underinvestment in industries with high sunk costs. The effects of regulatory changes may be measured by estimating the abnormal returns associated with the event. The results may suggest to regulators what should be encouraged or avoided. This article utilizes a fixed effects regression to examine abnormal returns from changes in Philippine nationalization regulations. The results are consistent with extant literature. Supreme Court decisions, which increased uncertainty and regulatory risk, produced negative abnormal returns. The initial release of draft implementing rules did not produce statistically significant effects, but a succeeding draft favouring liberalization, produced positive abnormal returns.
Bibliography:ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
content type line 23
ISSN:0003-6846
1466-4283
DOI:10.1080/00036846.2016.1194962