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This study evaluates the impact of macroeconomic shocks, financial market volatility, and regulatory and political risks on financial inclusion among developing economies. Data spanning the period from 2001 to 2020 were compiled from a sample of 39 Sub-Saharan Africa (SSA) economies for the analysis. Data analysis was performed using the panel-corrected standard error (PCSE) estimation technique by Beck and Katz (1995). The analysis suggests that macroeconomic risk, financial market volatility, and regulatory uncertainty constrain financial inclusion among reviewed economies. Further results suggest that effective governance or improved governance structures may not be enough to alleviate the adverse effects of macroeconomic risk, financial market volatility, and regulatory uncertainty on financial inclusion. The moderating impact of political instability on the nexus between macroeconomic risk and financial inclusion further highlights the inimical influence of both macroeconomic and political risks on financial inclusion. The various conclusions have significant implications for policymakers; they admonish the need for measures that ensure macroeconomic stability, promote financial market stability, and support unambiguous regulatory policies to foster financial inclusion. [ABSTRACT FROM AUTHOR]

This paper aims to examine how bank stress tests affect bank tax planning. The study uses US bank stress test bank size thresholds and a regression discontinuity design to investigate the effect of the Dodd-Frank Act and the instituted bank stress tests on bank tax planning. We use different measures of tax planning, including bank-specific measures and measures of tax avoidance, tax aggressiveness, and effective tax planning from recent literature. Our regression discontinuity and difference-in-differences regression analyses include bank and year fixed-effects and lagged bank characteristics to control for potential endogeneity. This study finds that stress tests have the unintended consequences of intensifying tax planning and increasing tax avoidance. Stress-test banks increase tax avoidance by accelerating charge-offs, net interest, and non-interest expenses. However, this increase in tax planning is not optimally maximized, leading to lower effective tax planning compared to non-stress-test banks. Banks with a substantial increase in tax avoidance under the Dodd–Frank Act tend to increase their risk, investing in high-risk-weight assets and lending in riskier loan categories. These findings are consistent with tax minimization conditions under added regulatory attention and policy uncertainty. Literature on bank tax planning is limited. Most tax avoidance literature excludes financial institutions such as bank holding companies mainly due to differences in business practices and regulatory frameworks. This study is the first to investigate tax planning behavior among US banks. The current study thus extends the research field by examining the effect of bank transparency regulations, such as bank stress tests, on bank tax planning activities. Our findings have a direct bank policy implication. They show that stress testing has the unintended consequences of increasing tax planning activities and consequently increasing risk-taking on banks with high tax avoidance, which goes against the goals of stress testing regulations.

This paper explores the direct impact of different types of supply chain integration on supply chain resilience in new energy vehicle manufacturing enterprises. It also elucidates the mediating role of supply chain risk management and the moderating role of regulatory uncertainty, proposing nine research hypotheses. Finally, it employs SPSS 26.0 software to analyze the research hypotheses using collected 309 sample data. The research results indicate the following: (1) Internal integration, supplier integration, and customer integration all positively influence supply chain resilience, with supplier integration having the most significant impact. (2) Supply chain risk management mediates the relationship between internal integration, supplier integration, customer integration, and supply chain resilience. (3) Regulatory uncertainty significantly negatively moderates the impact of internal integration and customer integration on supply chain resilience, but it does not significantly negatively moderate the impact of supplier integration on supply chain resilience. [ABSTRACT FROM AUTHOR]

Regulatory uncertainty about a technology confronts new technology-based firms (NTBFs) with questions of whether or not to adopt this technology. Following institutional theory, NTBFs are expected not to adopt a technology until regulatory uncertainty has been reduced. However, following the resource-based view, NTBFs are expected to adopt the technology under regulatory uncertainty due to limited or no regulation, as this provides them with an opportunity to secure competitive resources. We investigate whether regulatory uncertainty enabled or inhibited 108 fintech ventures in adopting blockchain's core application, cryptocurrency, in a time when governments were still considering potential regulation. Our findings indicate that regulatory uncertainty has a positive effect on NTBFs' adoption of technology. We extend our knowledge on the role of regulatory uncertainty in technology adoption and we shed light on the boundary conditions of both the resource-based view and institutional theory. Further, we reflect on regulating the "winds of change." [ABSTRACT FROM AUTHOR]

Situated in the U.S. electric utility industry in a period of significant market restructuring, our study investigates how market valuations of a firm's investments to develop intrafirm and interfirm information technology (IT) capabilities are conditional on regulatory context. We find that firms are rewarded by investing in intrafirm IT capabilities in a more deregulated context, and by investing in interfirm IT capabilities in a more uncertain regulatory context. When deregulation expands customer choice, intrafirm IT capabilities create value by enabling greater efficiency and service reliability through coordination of a firm's internal activities. When regulatory uncertainty increases for key aspects such as price control, value chain configuration, and information control, interfirm IT capabilities create value by enabling greater flexibility through reduction of external transaction costs with customers and suppliers. When allocating resources to develop IT capabilities, executives need to consider that market valuation of IT capabilities development is not static, but dynamic with changes in market structure and regulatory uncertainty. Regulators also need to consider that the regulatory context that they shape through their deliberations and decisions has a substantial impact on the market valuation of investments by firms to develop different types of IT capabilities. Prior research has differentiated intrafirm information technology (IT) capabilities that reduce internal coordination costs and interfirm IT capabilities that reduce external transaction costs. However, the influence of developing these capabilities on business value has not been explored in the realm of institutional governance—the regulatory context that defines the rules of the game for firms. We suggest that the value of a firm's investments in different types of IT capabilities development (ITCD) is evaluated by the financial market contingent on the firm's regulatory context. Our study is situated in the U.S. electric utility industry undergoing a market restructuring process to understand the impacts of intrafirm and interfirm ITCD on market value conditional on a firm's regulatory context characterized by the extent to which its business is located in states that allow consumer choice (i.e., deregulation), as well as the extent to which its business is located in states that deliberate regulations regarding price control, value chain configuration, and information control (i.e., regulatory uncertainty). We find that intrafirm ITCD for enhancing efficiency is rewarded in a firm's market valuation under a high level of deregulation. We further find that under a high level of regulatory uncertainty, interfirm ITCD for fostering flexibility can hedge against regulatory uncertainty and increase firm value. A key contribution of our work is demonstrating external institutional governance can influence the market value that firms accrue from different types of ITCD, thereby elaborating the complementarity in theoretical explanations of IT capabilities and institutional governance. History: Rajiv Kohli, Senior Editor; Huigang Liang, Associate Editor. Supplemental Material: The e-companion is available at https://doi.org/10.1287/isre.2023.1228. [ABSTRACT FROM AUTHOR]

This study investigates the effect of regulatory uncertainty on the translation of scientific discovery on emerging research topics to technical applications in science-driven industry. Our empirical analysis using the case of the US Federal Drug and Food Administration's release of the report on the regulatory approach to nanomedicine in 2007 shows that; (1) the regulatory uncertainty decelerated the translation of nanomedicine research to technical applications, (2) this effect was particular for the nanomedicine research on emerging topics in the field. Our further analysis suggests that the effect of the regulatory uncertainty originated from the suppressed business activities in the field where the regulatory uncertainty presents. Our study elaborates on how regulatory authority actions shape the innovation process by shedding light on the impact of regulatory uncertainty on the development of technical applications of an emerging scientific area. [ABSTRACT FROM AUTHOR]

Based on the perspective of the changes of CSRC's chairman, this paper investigates the relationship between regulatory uncertainty and corporate financialization. We find that the regulatory uncertainty positively affects corporate financialization through increasing firms' financialization motivation. Specifically, both the decline of regulatory policy continuity and regulatory intensity caused by changes of CSRC's chairman improve corporate financialization. The positive relationship between regulatory uncertainty and corporate financialization is more pronounced in non-state-owned firms and firms in non-strategic emerging industries. These findings have implications for listed firms and policy-makers to prevent firms transforming from substantial to fictitious. [ABSTRACT FROM AUTHOR]

We analyse the recent policy decisions made by the European Central Bank and the national authorities related to capital and shareholders' remuneration aimed at promoting banking credit supply in COVID-19-afflicted economies. We forecast the impact of the regulatory decisions based on the empirical literature and discuss the factors that reduce the banks' incentives to expand their loan portfolios. We argue that the introduction of the dividend ban caused a surge in regulatory uncertainty and undermined banks' market valuation raising the expected funding costs and contributing to the banks' reluctance to make use of the capital buffers. We develop policy suggestions intended to mitigate this effect. [ABSTRACT FROM AUTHOR]

This article examines the asymmetry that currently exists in South Africa in the regulatory treatment of customer data usage by mobile network operators (MNOs) and over-the-top (OTT) service providers. MNOs and OTTs must receive customer “consent”, in terms of the Protection of Personal Information Act (POPI Act) and its Regulations, before sharing the customer’s “personal information” with a third party. But MNOs have an additional requirement to meet, in terms of the Regulation of Interception of Communications and Provision of Communication-Related Information Act (RICA), which is not applicable to OTTs: a requirement whereby a customer must provide “written authorisation” to an MNO before the MNO can share “communication-related information which relates to the customer concerned” with a third party. In this article, I examine and analyse provisions of the POPI Act, POPI Act Regulations, RICA, other relevant legislation, court decisions, records of a Parliamentary hearing, the standard terms and conditions and privacy policies of two South African MNOs (Vodacom and MTN), and two international OTT service providers (Google and Facebook). Based on the analysis, I argue that the unequal regulatory treatment between the MNOs and OTTs, if allowed to persist, threatens to undermine the growth of key elements of South Africa’s digital economy.

Management of fisheries worldwide is increasingly shifting toward catch shares. The West Coast groundfish trawl fishery transitioned to catch shares management in 2011. We use a multi-year dataset from the Pacific Coast Groundfish Social Survey to explore how fishermen's job attitudes have changed in relation to catch shares management, and the influence this may have on fishing participation decisions. Using generalized linear mixed models, we found that job satisfaction has not significantly changed, whereas job stability and pay satisfaction have improved. We found that job stability, among other demographic items, is related to fishermen's participation plans in the groundfish fishery. The five-year period following catch shares implementation can be characterized by elevated levels of fishing participation change as fishermen cope with the uncertainty of a new program, and adjust to changes within the fishery—results which may relate to experiences of fishermen in other fisheries transitioning to catch shares. [ABSTRACT FROM AUTHOR]

Disagreement over the form of regulation of greenhouse gasses motivates a comparison of market based and command and control policies. More efficient policies can increase aggregate marginal abatement cost, resulting in higher emissions. Multiple investment equilibria and “regulatory uncertainty” arise when firms anticipate command and control policies. Market based policies eliminate this uncertainty. Command and control policies cause firms to imitate other firms’ investment decisions, leading to similar costs and small potential efficiency gains from trade. Market based policies induce firms to make different investment decisions, leading to different costs and large gains from trade. We imbed the regulatory problem in a “global game” and show that the unique equilibrium to that game is constrained socially optimal.

In 2010, the Obama Administration proposed new regulations designed to hold institutions of higher education (IHEs) accountable for student outcomes. I examine the effects of the regulatory uncertainty surrounding these "Gainful Employment" (GE) regulations on enrollment at for-profit IHEs. I utilize informational debt rates of GE institutions along with enrollment data from the integrated postsecondary education data system to employ a difference in difference design that compares enrollment before and after the GE regulatory proposal at for-profit IHEs to enrollment at public and nonprofit IHEs. My results suggest that for-profit IHEs experienced slower enrollment growth relative to public and nonprofit IHEs in the post-GE period. Additionally, enrollment of low-income students appeared to be disproportionately affected by the GE regulatory uncertainty. [ABSTRACT FROM AUTHOR]

Abstract This article empirically compares the effectiveness of relative versus absolute performance standards in motivating compliance actions. By leveraging a unique set of Chilean administrative panel data, I examine a natural experiment created by a change in the performance standard used to incentivize the reduction of particulate matter in the atmospheric emissions of stationary pollution sources in the Santiago Metropolitan Region. I find that the absolute standard drove ∼21% less emissions cleanup than did the relative standard. I also demonstrate how sharp heterogeneity in responses to the change in standards is predictable based on an ex-ante identifiable type-categorization, which leads to the broadly-applicable conclusion that stricter regimes drive more compliance actions when imposed via an absolute performance standard compared to a relative standard. The extension of this framework provides a general means of anticipating whether an absolute or relative performance standard will drive higher rates of compliance actions in other settings. [ABSTRACT FROM AUTHOR]

We examine how regulatory uncertainty impacts the credit spreads of covered bonds issued by U.S. domiciled banks. Using data on covered bonds issued by Washington Mutual and Bank of America, for the September 2006 to December 2016 period, we find that investors require an incremental spread that equals approximately half of the credit spread on unsecured benchmark bonds as compensation for uncertainty about the legal status of covered bonds in the event of default. Systematic and other risk factors cannot explain the magnitude of the regulatory spread. We draw broader lessons on how investors impound regulatory outcomes into asset prices. [ABSTRACT FROM AUTHOR]

We present a real options model for capacity expansion that introduces uncertainty about potential future regulation (regulatory uncertainty) and key characteristics of capacity decisions: investment with time to build, divestment, the option to charter, and operating flexibility. Regulatory uncertainty is modelled as a possible jump in operating, investment, and charter costs during the simulation horizon. We find that regulatory uncertainty with grandfathering (the extant fleet is exempt from compliance) promotes high up-front investment leading to excess capacity and increased emissions. However, regulatory uncertainty without grandfathering reduces investment and emissions and the use of more flexible capacity options, such as chartering. [ABSTRACT FROM AUTHOR]

In a nutshell, price cap regulation is meant to establish a quid pro quo: regulators are obliged by law to intervene only at rare, previously defined points in time, and only by imposing an upper bound on prices; firms are meant to justify regulatory restraint by adopting socially beneficial innovations. In the policy debate, a potential downside of the arrangement has featured less prominently: the economic environment is unlikely to be stable while the cap is in place. If regulators take this into account, they have to decide under uncertainty and also anticipate how regulated firms will react. In a lab experiment, we manipulate the degree of regulatory uncertainty. We compare a baseline when regulators have the same information as firms about demand with treatments wherein they receive only a noisy signal and another when they know only the distribution from which demand realizations are taken. In the face of uncertainty, regulators impose overly generous price caps, which firms exploit. In the experiment, the social damage is severe, and does not disappear with experience. [ABSTRACT FROM AUTHOR]

This paper investigates whether and how corporate giving is affected by a firm's perceived degree of environmental uncertainty in the context of a transition economy. Evidence from a nationwide survey of private firms across China suggests that both regulatory uncertainty and market uncertainty in a transition economy motivate firms to conduct corporate giving. Further, a firm's political ties and financial performance alleviate its response to environment pressures. Specifically, both political ties and financial performance reduce the impact of regulatory uncertainty on both giving probability and amount, but neither affects market uncertainty's impact. This study illustrates the role of environmental uncertainty in driving corporate social behavior among Chinese private firms, and provides valuable insights for corporate giving in other transition economies. [ABSTRACT FROM AUTHOR]

Grounded by Contingency Theory, the study focuses on the impact of Environmental Protection Agency (EPA) regulatory action on market innovation. Based upon detailed interview from eighty one marketing executives representing both the industry and non-industry, the study identifies fourteen different uncertainty categories relating to EPA regulations. The results indicate a very high level of perception within the government regulatory action posing a significant risk to ecologically related innovation among industrial firms. [ABSTRACT FROM AUTHOR]

The European Union Emission Trading Scheme (EU ETS) – by far the largest in its kind-has inspired several other carbon markets in the world. Based on interviews with plant managers from almost all Belgian ceramics, lime and cement producers, this study describes how manager's perceptions on emission trading affected investment decisions. In line with behavioural economics, reference-dependence is found to explain why free allocation below emissions creates a greater incentive to abatement investment compared to allocation above emissions. In the ceramics sector, allocation above emissions refrained managers from including carbon gains in payback times. This contradicts the famous Coase theorem, which predicts that free allocation has no effect on abatement incentives. The results indicate that auctioning part of the emission rights will reduce barriers to abatement investment. Carbon price uncertainty is seen as a disincentive for abatement investment by some managers and as an incentive by others. Intermediate levels of uncertainty add option value to abatement investments because the associated gradual learning adds flexibility in an uncertain carbon constrained future. However, high levels of uncertainty, creating a risk of offshoring even when companies innovate, creates an option value to postpone abatement investments. Narrow framing, misperceiving the risk-hedging counter-cyclicality of carbon costs, reinforces the option value to wait. Therefore, policy should aim to reduce price uncertainty for very low and very high carbon prices, not for an intermediary price range. [ABSTRACT FROM AUTHOR]

Regulatory uncertainties have often posed a business risk to renewable energy investors. Energy regulations in Spain were recently revised in June 2014. The objective of this study is to analyze the 50 MW wind power project under revised framework. The project is evaluated using NPV with risk and real options method through Monte Carlo simulations. As a part of this study, five scenarios were evaluated. The base scenario, “Business As Usual (BAU)” consist of recent framework that was into place, just before the new regulation was announced. The other scenarios (including newly introduced framework) were compared to the BAU. We have focused on “delay” option for the current scope. The overall results of the study suggest a negative NPV under the revised framework, with significantly higher delay value. From the results, it is advisable to delay the project. The paper presents the policy implications under scenarios selected in the papers. The article also presents the policy implication for developing countries. The study also served as the learning for developing nations from European Union states. [ABSTRACT FROM AUTHOR]

Frequent adjustments of environmental regulations usually cause business and investment risks, resulting in significant challenges for policy effectiveness. This paper examines how regulatory uncertainty affects decision making through an empirical study of the 'Pay for Permit' policy in the Tai Lake Basin in China. The results show that firms' willingness to decrease pollution is positively influenced by their perceived attitudes, social pressure, and perceived behavioural control. In addition, perceived regulatory uncertainty has significant impacts on social pressure and attitudes toward pollution control. Firms that perceive less regulatory uncertainty are more inclined to adopt antipollution strategies under the Pay for Permit policy. To reduce regulatory uncertainty, China's policy makers should maintain a consistent level of environmental regulations, set clear and reliable long-term policy targets, and strengthen policy enforcement. [ABSTRACT FROM AUTHOR]

Policy uncertainty can be a powerful deterrent to immediate investments. Based on panel data of 214 licenses to construct small run-of-the-river hydropower plants, we examine whether the prospect of a common Swedish–Norwegian market for green certificates (i.e., a renewable portfolio standard scheme) affected the timing of investments. Our results show that traditional utilities and other professional investors in the energy market acted in accordance with a real options investment rule, and the prospect of possible future subsidies delayed their investment decision. On the other hand, our results do not show that farmers and other non-professional investors incorporated timing considerations in their investment decisions. Rather, our results indicate that these investors behaved as if their investment opportunity is now-or-never, investing if the project is profitable according to a net present value investment rule, ignoring the opportunity to create additional value by waiting. The observed difference in behavior between professional and non-professional investors is interesting given the distributed nature of many renewable energy technologies, and can help planners and policymakers better understand the forces shaping the future market for electricity. [ABSTRACT FROM AUTHOR]

Abstract: This article studies the impact of regulatory uncertainty on an incumbent’s incentives to undertake the socially optimal investments in NGA networks. Thus, a regulatory non-commitment setting in which the regulator sets the access price after the deployment of the NGA network is used. In particular, it is assumed that the regulator sets the access price at the marginal cost of providing the access with some probability and gives an access markup, which equals the average cost of the investments, with the complementary probability. It is found that when the slope of the marginal investment cost function is not particularly steep in relation to the impact of investments on demand, the incumbent underinvests compared to the socially optimal investment level. On the contrary, in a more realistic case when the impact of investments on demand is low in relation to the slope of the marginal investment cost function, the incumbent may overinvest or underinvest depending on the probability of incorporating an access markup into the access price. [Copyright &y& Elsevier]

The medical product sector is characterised by a regulatory patchwork of European and national laws and guidelines operating concurrently with each other. Each of these sectors are characterised by different levels of regulatory uncertainty that may undermine the effectiveness of the regulatory framework. How have European regulation shaped individual product sectors? How has that impacted regulatory uncertainty in that sector? What has been the impact of regulatory compliance? Drawing on documentary research and fieldwork interviews this pilot study conducted in Netherlands, finds that ATMPs and medical device sectors exhibit high level of regulatory uncertainty. Although the sources of uncertainty are varied across each of the sectors. In some instances when regulatory uncertainty have reached unmanageable levels, measures have been taken by regulators to address it. Regulatees themselves have developed a complex compliance strategy that allows them to tolerate and in certain circumstances even circumvent regulatory uncertainty. [ABSTRACT FROM PUBLISHER]

This paper analyzes the effects of regulatory uncertainty regarding labor costs on investment in a liberalized market. We distinguish between the external investment margin (market entry) and the internal investment margin (technology), and establish that regulatory uncertainty affects these margins differently, encouraging market entry, but discouraging technological investment. As a consequence, the impact of regulatory uncertainty on competition in liberalized markets is a combination of these two countervailing forces. [ABSTRACT FROM AUTHOR]