Regulatory Intensity and Firm-Specific Exposure

Abstract Building on administrative data and machine-learning models, I develop a firm-specific measure of regulatory intensity: cost of compliance with all federal paperwork regulations. Regulatory intensity increases the cost of goods sold and overhead spending (SGA). It also incentivizes companies to reduce capital investment, hire fewer employees, and lobby more. The effects are particularly strong among financially constrained firms and those with irreversible investment opportunities, suggesting that regulation affects companies through budgetary pressures and heightened uncertainty. The findings highlight the real effects of regulation and the underlying mechanisms. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.