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Anticipated vs Realized Benefits: Can Event Studies be used to Predict the Impact of New Regulations

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  • Kara M Reynolds

    (Department of Economics, American University, 4400 Massachusetts Avenue, NW, Washington, DC 20016, USA.)

Abstract

Economists use event studies to evaluate the impact of new regulations before there are enough data to empirically estimate the effects. This research investigates how accurately event studies and financial markets predict the benefits associated with a new law. Specifically, I utilize a change in US antidumping law known as the Byrd Amendment to compare the benefits predicted by event study methodology with the actual benefits accruing to individual firms under the law. The results illustrate why researchers who utilize event studies should be cautious when interpreting their results as estimates of the true impact of a regulatory change. Eastern Economic Journal (2008) 34, 310–324. doi:10.1057/palgrave.eej.9050036

Suggested Citation

  • Kara M Reynolds, 2008. "Anticipated vs Realized Benefits: Can Event Studies be used to Predict the Impact of New Regulations," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 34(3), pages 310-324.
    • Handle: RePEc:pal:easeco:v:34:y:2008:i:3:p:310-324
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    Cited by:

    1. Russell, Bonita I. & Shapiro, Daniel & Vining, Aidan R., 2010. "The evolution of the Canadian mining industry: The role of regulatory punctuation," Resources Policy, Elsevier, vol. 35(2), pages 90-97, June.
    2. Budzinski, Oliver, 2012. "Impact evaluation of merger control decisions," Ilmenau Economics Discussion Papers 75, Ilmenau University of Technology, Institute of Economics.
    3. Manoj Anand & Jagandeep Singh, 2018. "Impact of Automobile Regulations on Shareholders’ Wealth: Indian Empirical Evidence," Metamorphosis: A Journal of Management Research, , vol. 17(1), pages 28-40, June.
    4. Benjamin Liebman & Kasaundra Tomlin, 2015. "World Trade Organization sanctions, implementation, and retaliation," Empirical Economics, Springer, vol. 48(2), pages 715-745, March.
    5. Aviad Tur-Sinai, 2014. "Adaptation patterns and consumer behavior as a dependency on terror," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 13(2), pages 257-269, November.
    6. Haji Ali Beigi, Maryam & Budzinski, Oliver, 2012. "On the use of event studies to evaluate economic policy decisions: A note of caution," Ilmenau Economics Discussion Papers 80, Ilmenau University of Technology, Institute of Economics.

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