Public Firms and Regulatory Challenges: Implications for Cross-Country Shareholder-Stakeholder Conflicts

Abstract

There are widespread concerns about corporations’ influence on government policy-making. We provide descriptive evidence of firms’ economic incentives to challenge foreign government policy-making. We document three main findings. First, publicly traded companies are more likely to initiate legal disputes against industry-wide foreign government policies, and these disputes take significantly longer to resolve. We interpret these results as being consistent with firms attempting to delay regulations and deter their introduction in other countries. Second, public firms have fewer free-riding incentives due to their greater stakes in the industry and generate positive stock market returns when initiating such disputes. Third, public firms prioritize domestic shareholders over foreign stakeholders, adding a geographic dimension to shareholder-stakeholder conflicts.

Keywords: Public firms, regulatory challenges, corporate political influence, shareholder-stakeholder conflict, investor-state dispute settlement