IDEAS home Printed from https://ideas.repec.org/a/oup/amlawe/v24y2022i2p449-494..html
   My bibliography  Save this article

Estimating Firms’ Responses to Securities Regulation Using a Bunching Approach

Author

Listed:
  • Dhammika Dharmapala

Abstract

Many important provisions of US securities law—most notably, crucial elements of the Sarbanes-Oxley (SOX) legislation enacted in 2002—apply only to firms that have a public float of at least $75 million. Public float (i.e., the market value of shares held by non-insiders) is not comprehensively reported in standard databases, so I “scrape” public float data from firms’ 10-K filings for an extensive sample of reporting entities over fiscal years 1993–2015. I use a bunching approach that compares the number of observations immediately below the $75 million threshold to a smooth counterfactual density. Prior to SOX (i.e., over 1993–2002), there is no detectable bunching. Following SOX (i.e., over 2003–15), there is statistically significant evidence of bunching. However, the magnitude of bunching is relatively modest. Moreover, bunching is concentrated in the early post-SOX years (2003–09) and is virtually absent in later years (2010–15). The magnitude of bunching is not a sufficient statistic for the compliance costs of securities regulation because the costs of managing public float are unobservable. Nonetheless, the results of the bunching analysis cast some doubt on widespread claims that the regulatory burdens of these securities law provisions are large.

Suggested Citation

  • Dhammika Dharmapala, 2022. "Estimating Firms’ Responses to Securities Regulation Using a Bunching Approach," American Law and Economics Review, American Law and Economics Association, vol. 24(2), pages 449-494.
  • Handle: RePEc:oup:amlawe:v:24:y:2022:i:2:p:449-494.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/aler/ahac013
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:amlawe:v:24:y:2022:i:2:p:449-494.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/aler .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.