USING INFORMATION DIFFUSION-MODELS TO ESTIMATE THE IMPACTS OF REGULATORY EVENTS ON PUBLICLY TRADED FIRMS

Analysis and evaluation of regulatory actions require inexpensive and timely information about resultant costs and benefits. This paper exte nds the traditional 'event study' methodology for assessing the impact of regulatory actions on the value of publicly traded firms. We use d iffusion theory to construct several models of how markets adjust to r egulatory events. Ex ante preference for a particular model is based o n prior knowledge about the characteristics of the regulatory event an d information diffusion patterns. We demonstrate the use of the method ology by applying it to an analysis of the impacts of a regulatory act ion taken to protect the northern spotted owl.