Abstract

http://ssrn.com/abstract=2037769
 
 

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Firms’ Compliance with Complex Regulations


Juan P. Mendoza


VU University Amsterdam

Henri C. Dekker


VU University Amsterdam - Department of Accounting

J. Wielhouwer


VU University Amsterdam

November 13, 2015


Abstract:     
In numerous settings, firms are expected to comply with complex regulations, which are technical, extensive, and often subject to modifications. Building on research from different fields, we hypothesize that perceiving regulatory complexity as fair motivates firms to stay up-to-date and acquire knowledge of the regulation, and that this knowledge in turn increases their ability to comply. Fairness perceptions about complexity are crucial in this context because authorities cannot force firms to acquire knowledge, and these perceptions move firms to voluntarily acquire the knowledge that is needed to comply. To test this hypothesis, we analyze official (anonymized) data from the setting of financial intermediation in the Netherlands. The results show that firms' knowledge of the regulation mediates the association between fairness perceptions about regulatory complexity and the level of compliance (measured as the number of law violations). This indicates that compliance is affected not necessarily by the level of complexity in itself, but by the extent to which it is perceived as fair.

Number of Pages in PDF File: 36

Keywords: complex regulations, compliance, knowledge acquisition, fairness perceptions

JEL Classification: G28, K22, K42


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Date posted: May 1, 2012 ; Last revised: November 14, 2015

Suggested Citation

Mendoza, Juan P. and Dekker, Henri C. and Wielhouwer, J., Firms’ Compliance with Complex Regulations (November 13, 2015). Available at SSRN: http://ssrn.com/abstract=2037769 or http://dx.doi.org/10.2139/ssrn.2037769

Contact Information

Juan P. Mendoza
VU University Amsterdam ( email )
De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
Henri C. Dekker
VU University Amsterdam - Department of Accounting ( email )
Netherlands
Jacco L. Wielhouwer (Contact Author)
VU University Amsterdam ( email )
De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
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