Regulations introduce significant fixed costs and add to operating leverage. Fixed regulatory costs that contribute to operating leverage should generate a risk premium. To explore whether such a premium exists, we introduce a measure of “regulatory operating leverage” that reflects the importance of fixed regulatory costs in a firm’s cost structure. Regulatory operating leverage predicts stock returns in the cross-section, and a zero-cost high-low regulatory operating leverage strategy generates positive and significant risk-adjusted return. Finally, the impact of regulatory operating leverage on returns is due to the (systematic) risk contribution of fixed regulatory costs.

中文翻译：

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监管的代价：监管成本和股票回报横截面

法规引入了大量的固定成本并增加了运营杠杆。有助于运营杠杆的固定监管成本应该会产生风险溢价。为了探讨这种溢价是否存在，我们引入了“监管运营杠杆”的衡量标准，它反映了固定监管成本在公司成本结构中的重要性。监管运营杠杆预测横截面的股票回报，零成本高低监管运营杠杆策略可产生正的、显着的风险调整回报。最后，监管运营杠杆对回报的影响是由于固定监管成本的（系统性）风险贡献。