This paper reviews the economic theory of regulation and surveys the empirical evidence on its application to past and recent changes in U.S. securities regulation. The theory provides multiple potential motives for regulation and cautions the empirical researcher against naïve modeling of the costs and benefits of regulatory change. Moreover, the nature of the regulatory process compounds the standard pitfalls of empirical analysis such as endogeneity and confounding events. Productive empirical techniques include the development of cross-sectional predictions of the effects of regulation as well as the use of unregulated control samples. An important avenue for future research is a more refined estimation of the extent to which regulation has unintended consequences.

We study the shareholder wealth effects of 270 proxy contests for board seats in the 1979–1994 period. We find that proxy contests create value, with the bulk of the wealth gains stemming from firms that are acquired. Restricting analysis to firms listed on Compustat imparts a downward bias on estimated wealth effects because such a restriction excludes a sizable fraction of the firms acquired during the proxy contest. For firms that are not acquired, the occurrence of management turnover has a significant, positive effect on shareholder wealth because firms replacing management are more likely to restructure following the contest.

We study industry-level patterns in takeover and restructuring activity during the 1982–1989 period. Across 51 industries, we find significant differences in both the rate and time-series clustering of these activities. The interindustry patterns in the rate of takeovers and restructurings are directly related to the economic shocks borne by the sample industries. These results support the argument that much of the takeover activity during the 1980s was driven by broad fundamental factors and have general implications for the stock price spillover effects of takeover announcements, corporate performance following takeovers, and the timing of takeover waves.

[We provide new evidence on termination provisions and the takeover bidding process. Our central contribution is a novel database from Securities and Exchange Commission (SEC) documents that accurately measures the incidence of termination provisions and the depth of competition in takeover deals. We show that biased data in prior research produced incorrect conclusions on the relation between termination provisions and judicial decisions, bidder toeholds, and deal size. Our comprehensive data also show that termination provisions are positively related to takeover competition. Our evidence is consistent with the information/commitment hypothesis in which termination provisions do not truncate bidding but instead culminate the takeover process.]

[Prior analyses of prices of the NYSE and other exchanges find that transitory price volatility is greater at the open of trading than at the close. We extend this line of research by using 40 years of hourly Dow Jones 65 Composite price index data to estimate transitory volatility throughout the trading day. Our results indicate that transitory volatility steadily declines during the trading day. We find a similar intraday decline in transitory volatility for a 21/2-year sample of the individual firms in the Dow Jones 30 Industrials Index. The results are consistent with the hypothesis that trading aids price formation and do not support the argument that particular trading mechanisms are the source of greater volatility at the open of trading.]

Prior analyses of prices of the NYSE and other exchanges find that transitory price volatility is greater at the open of trading than at the close. We extend this line of research by using 40 years of hourly Dow Jones 65 composite price index data to estimate transitory volatility throughout the trading day. Our results indicate that transitory volatility steadily declines during the trading day. We find a similar intraday decline in transitory volatility for a 2½-year sample of the individual firms in the Dow Jones 30 Industrials Index. The results are consistent with the hypothesis that trading aids price formation and do not support the argument that particular trading mechanisms are the source of greater volatility at the open of trading.

We study the relation between the number of news announcements reported daily by Dow Jones & Company and aggregate measures of securities market activity including trading volume and market returns. We find that the number of Dow Jones announcements and market activity are directly related and that the results are robust to the addition of factors previously found to influence financial markets such as day-of-the-week dummy variables, news importance as proxied by large New York Times headlines and major macroeconomic announcements, and noninformation sources of market activity as measured by dividend capture and triple witching trading. However, the observed relation between news and market activity is not particularly strong and the patterns in news announcements do not explain the day-of-the-week seasonalities in market activity. Our analysis of the Dow Jones database confirms the difficulty of linking volume and volatility to observed measures of information.

We study the relation between the number of news announcements reported daily by Dow Jones & Company and aggregate measures of securities market activity including trading volume and market returns. We find that the number of Dow Jones announcements and market activity are directly related and that the results are robust to the addition of factors previously found to influence financial markets such as day-of-the-week dummy variables, news importance as proxies by large 'New York Times' headlines and major macroeconomic announcements, and non-information sources of market activity as measured by dividend capture and triple switching rating. However, the observed relation between news and market activity is not particularly strong and the patterns in news announcements do not explain the day-of-the-week seasonalities in market activity. Our analysis of the Dow Jones database confirms the difficulty of linking volume and volatility to observed measures of information.

We study the relation between the number of news announcements reported daily by Dow Jones & Company and aggregate measures of securities market activity including trading volume and market returns. We find that the number of Dow Jones announcements and market activity are directly related and that the results are robust to the addition of factors previously found to influence financial markets such as day‐of‐the‐week dummy variables, news importance as proxied by large New York Times headlines and major macroeconomic announcements, and noninformation sources of market activity as measured by dividend capture and triple witching trading. However, the observed relation between news and market activity is not particularly strong and the patterns in news announcements do not explain the day‐of‐the‐week seasonalities in market activity. Our analysis of the Dow Jones database confirms the difficulty of linking volume and volatility to observed measures of information.