Anticipatory effects around proposed regulation: Evidence from Basel III

The Accounting Review, Forthcoming

51 Pages Posted: 16 Nov 2013 Last revised: 22 Jan 2022

See all articles by Bradley E. Hendricks

Bradley E. Hendricks

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Jed Neilson

Pennsylvania State University

Catherine Shakespeare

University of Michigan - Stephen M. Ross School of Business

Christopher D. Williams

University of Michigan, Stephen M. Ross School of Business

Date Written: January 1, 2022

Abstract

Regulation is often proposed, developed, and finalized over a lengthy rulemaking period
prior to its adoption. We examine the period over which banking authorities discussed,
adopted, and implemented Basel III to understand how firms respond to proposed regulation.
We find evidence to suggest that affected banks not only lobbied rule makers against it, but
that they also made strategic financial reporting changes and altered their business models in
ways that reduced their exposure to the proposed rule prior to rule makers finalizing the
regulation. Further, our results indicate a sequential response, with banks responding through
lobbying and strategic financial reporting prior to making business model changes. These
findings highlight the interplay among firms’ financial reporting, business model, and
political choices in response to proposed regulation, and indicate that the appropriate date
for an event study may be the regulation’s announcement date rather than its adoption or
implementation dates.

Keywords: Regulation, Anticipatory Effects, Fair Value, Financial Reporting, Basel III, Event Study, Research Design

JEL Classification: G14, G21, G28, M41, M48

Suggested Citation

Hendricks, Bradley E. and Neilson, Jed and Shakespeare, Catherine and Williams, Christopher D., Anticipatory effects around proposed regulation: Evidence from Basel III (January 1, 2022). The Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2354618 or http://dx.doi.org/10.2139/ssrn.2354618

Bradley E. Hendricks (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
(919) 962-3619 (Phone)

Jed Neilson

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States
8148650327 (Phone)

HOME PAGE: http://directory.smeal.psu.edu/jjn12

Catherine Shakespeare

University of Michigan - Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Christopher D. Williams

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
(734)647-2842 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
506
Abstract Views
3,566
rank
78,886
PlumX Metrics