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Ulric B. and Evelyn L. Bray Social Sciences Seminar

Monday, May 10, 2021
12:00pm to 1:00pm
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Online Event
Regulatory Costs of Being Public: Evidence from Bunching Estimation
Michael Ewens, Professor of Finance and Entrepreneurship, Division of the Humanities and Social Sciences, Caltech,

Abstract: Many disclosure and internal governance regulations for U.S. public firms 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 introduced from 1992 to 2012. We present a revealed preference estimation strategy that uses this behavior to quantify regulatory costs. Our estimates show that various disclosure and internal governance rules leads to a total compliance cost of 4.3% of the market capitalization for a median U.S. public firm. We apply the estimated costs to firms' public-private choice and show that regulatory costs significantly impact private firms' decisions to go public, while have limited effects on public firms' decisions to go private.

For more information, or if you are interested in attending this online seminar, please contact Letty Diaz by email at letty.diaz@caltech.edu.