Regulatory costs of being public: Evidence from bunching estimation

• 成果类型: Article
• 署名作者: Ewens, Michael; Xiao, Kairong; Xu, Ting
• 署名单位: Columbia University; National Bureau of Economic Research; University of Toronto
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2023.103775
• 发表日期: 2024
• 关键词: Costs of being public; Bunching estimator; Capital market regulation; Disappearing public firms

摘要

We quantify the costs of major disclosure and governance regulations by exploiting a regulatory quirk: many rules trigger when a firm's public float exceeds a threshold. Consistent with firms avoiding costly regulation, we document significant bunching around three major regulatory thresholds. Estimations reveal that the three examined rules' compliance costs range from 1.2% to 1.8% of market capitalization for firms near thresholds. For a median U.S. public company, total costs amount to 4.3% of market capitalization, and at least 2.3% absent regulatory avoidance frictions. These cost estimates are robust across various extrapolation assumptions, ranging from 2.1% to 6.3% of market capitalization. Regulatory costs have a greater impact on private firms' IPO decisions than on public firms' going private decisions, but such costs only explain a small part of the decline in the number of public firms.