"An Event Study Analysis of Regulatory Uncertainty Stemming from the Implementation of the Dodd-Frank Act"
Cox, Joseph Benaiah
Fleming, Matthew H.
This paper investigates the possibility of regulatory uncertainty stemming from financial regulation rule announcements relating to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Information on regulatory announcements is developed from the Davis-Polk Regulatory Tracker, while firm price and fundamentals information is collected from the Center for Research on Securities Prices and Compustat. The event study methodology allows for timely exploration of the possibility of regulatory uncertainty surrounding Dodd-Frank implementation. Two versions of the event study methodology are employed: the classic model with abnormal returns as the dependent variable and the multivariate regression model with equally weighted average returns to portfolios of firms as the dependent variable. Descriptive statistics show that average returns and market adjusted returns are lower on days with regulatory announcements, but regression results show that these differences are not statistically significant. There are some indications of a slight difference in returns on days with regulation but insufficient evidence to support claims of significant economic consequences from regulatory uncertainty.
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