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Impact of Regulations on Firm Value: Evidence from the 2016 U.S. Presidential Election

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  • Kundu, Santanu

Abstract

Using the 2016 U.S. presidential election result as a shock to the expectations about the future regulatory environment, I find that most regulated firms earned approximately 4% higher cumulative abnormal stock returns than least regulated firms during the first 10 trading days after the election. Exploring economic mechanisms, I find evidence consistent with the explanation that more regulations disproportionately harm high-growth firms and allow incumbent firms to extract rents through lower competition and political favoritism. Stock returns are also followed by a shift in firm fundamentals over 3 years after 2016, consistent with the economic mechanisms.

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  • Kundu, Santanu, 2024. "Impact of Regulations on Firm Value: Evidence from the 2016 U.S. Presidential Election," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 59(4), pages 1659-1691, June.
    • Handle: RePEc:cup:jfinqa:v:59:y:2024:i:4:p:1659-1691_6
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