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

May 7, 2013


Abstract:     
Complex regulations are technical, extensive, and often subject to modifications. Although regulatory complexity is found in numerous regulatory settings, little is known about factors that explain firms’ compliance with complex regulations. Building on research from different fields, our hypothesis is that perceiving regulatory complexity as fair motivates firms to acquire knowledge about the regulation, and that this knowledge in turn increases their ability to comply. We argue that fairness perceptions are crucial in this context, as authorities cannot force firms to acquire knowledge, and these perceptions promote voluntary acquisition of knowledge that is needed to comply. To test our hypothesis, we employ official (anonymized) data from the setting of financial intermediation in the Netherlands, which fits the description of a setting with complex regulations. Our analysis shows that fairness perceptions about regulatory complexity are associated with knowledge of the regulation, which is in turn associated with compliance (measured as number of law violations). The results indicate that compliance depends not on complexity in itself, but on the extent to which complexity is perceived as fair.

Number of Pages in PDF File: 34

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

JEL Classification: G28, K22, K42


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Date posted: May 1, 2012 ; Last revised: August 7, 2015

Suggested Citation

Mendoza, Juan P. and Dekker, Henri C. and Wielhouwer, J., Firms’ Compliance with Complex Regulations (May 7, 2013). 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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