Regulatory Costs of Being Public: Evidence from Bunching Estimation

88 Pages Posted: 11 Feb 2021 Last revised: 11 Sep 2022

See all articles by Michael Ewens

Michael Ewens

Columbia Business School; National Bureau of Economic Research (NBER)

Kairong Xiao

Columbia University - Columbia Business School

Ting Xu

University of Virginia - Darden School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: September 10, 2022

Abstract

We quantify the costs of major disclosure and governance regulations by exploiting a regulatory quirk: many rules trigger when a firm's public float exceeds a threshold. Consistent with firms seeking to avoid costly regulation, we document significant bunching around multiple regulatory thresholds. A bunching estimation shows that various disclosure and internal governance rules lead to a total compliance cost of 4.1% of the median firm's market capitalization. Regulatory costs have a greater impact on private firms' IPO decisions than on public firms' going private decisions, but such costs only explain a small part of the decline in the number of public firms.

Keywords: costs of being public, bunching estimator, capital market regulation, disclosure, governance

JEL Classification: G21, G28

Suggested Citation

Ewens, Michael and Xiao, Kairong and Xu, Ting, Regulatory Costs of Being Public: Evidence from Bunching Estimation (September 10, 2022). Available at SSRN: https://ssrn.com/abstract=3740722 or http://dx.doi.org/10.2139/ssrn.3740722

Michael Ewens

Columbia Business School ( email )

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National Bureau of Economic Research (NBER) ( email )

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Kairong Xiao

Columbia University - Columbia Business School ( email )

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Ting Xu (Contact Author)

University of Virginia - Darden School of Business ( email )

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Charlottesville, VA 22906-6550
United States

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