The Hidden Costs of Being Public: Evidence from Multinational Firms Operating in an Emerging Market

53 Pages Posted: 10 Mar 2017 Last revised: 25 Oct 2019

See all articles by Pablo Slutzky

Pablo Slutzky

University of Maryland - Robert H. Smith School of Business

Date Written: October 24, 2019

Abstract

This paper studies how firms deal with business regulations that limit their operations. I first exploit a natural experiment to show that the ownership structure of a firm affects its degree of compliance with regulations, with publicly listed firms complying more than privately held ones. Then I show that this differential compliance imposes a burden on listed firms that helps explain the patterns of M&A activity. When the level of market regulations increases, private firms acquire listed ones, and listed firms stop acquiring private ones. These results uncover an additional cost faced by listed companies, identify a new driver of M&A transactions, and show evidence that high levels of regulation lead to opaque corporate structures.

Keywords: Mergers and Acquisitions, Stock Market Listing, Ownership Structure

JEL Classification: G32, G34, G38

Suggested Citation

Slutzky, Pablo, The Hidden Costs of Being Public: Evidence from Multinational Firms Operating in an Emerging Market (October 24, 2019). Available at SSRN: https://ssrn.com/abstract=2928711 or http://dx.doi.org/10.2139/ssrn.2928711

Pablo Slutzky (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

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