Lobbying and One-Size-Fits-All Securities Regulation
Henry L. Friedman
University of California, Los Angeles (UCLA) - Accounting Area
Mirko Stanislav Heinle
University of Pennsylvania - Accounting Department
February 7, 2013
Is securities regulation tailored to specific firms necessarily more efficient than regulation applied uniformly to all firms? We develop a model to compare individualized (IR) and one-size-fits-all (OS) regulation. In our model, two firms must raise capital from investors and can lobby the securities regulator, who is also subject to political pressure. We find that the OS regime is more welfare efficient than the IR regime due to less wasteful lobbying and more available funding. We also develop empirical predictions on how agency problems and product and capital market interactions between firms affect regulatory strength, lobbying, and costs of capital.
Number of Pages in PDF File: 43
Keywords: Securities, Regulation, Lobbying
JEL Classification: D72, G38, L51, M48
Date posted: July 15, 2012 ; Last revised: February 12, 2013
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