Real effects of non-punitive regulatory interventions
- Publication Type:
- Thesis
- Issue Date:
- 2025
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Non-compliance with regulations presents a persistent challenge to society with far-reaching social and economic consequences. While regulators employ different types of regulatory interventions to detect and rectify non-compliance, extant scholarly work has predominantly focused on firms’ responses to punitive interventions. The extent to which non-punitive regulatory interventions have real effects on firms’ operations remains largely unexplored, even though a substantial portion of regulatory interventions in corporate settings are non-punitive in nature. Therefore the objective of this thesis is to investigate the real effects of non-punitive regulatory interventions.
This thesis presents two studies that address this research objective. The first study investigates the extent to which firms respond to non-punitive regulatory interventions at the operational level, and how organisational factors influence firms’ operational responses. Drawing on deterrence theory, the first study finds that firms respond to non-punitive intervention by increasing resource allocations to key operational activities (operational staff) related to compliance. Further analyses show that changes in operational resource allocations are more pronounced in loss-making firms and firms within larger organisations compared to profit-making firms and firms within smaller organisations, but there are no differences between for-profit and non-profit firms. In summary, the first study indicates that non-punitive interventions have a real effect on firms’ operational activities. However, firms’ responses are not homogeneous and are likely to be conditional on identifiable organisational factors, namely financial viability and organisational size.
The second study investigates to what extent information of sibling firms influences firms’ operational responses to non-punitive regulatory interventions. More specifically, the second study aims to investigate how the relative compliance performance information of sibling firms affects a focal firm’s operational resource allocations following non-punitive intervention. Integrating relative performance information theory with deterrence theory, the second study posits that a focal firm’s operational responses depends on its relative compliance performance compared to sibling firms and the size of their relative compliance performance gap. On average, firms with worse compliance performance than sibling firms are more responsive to non-punitive interventions. In responding, they adjust operational resource allocation decisions in key operational areas. However, as the size of the relative compliance performance gap between a focal firm and its sibling firms increases, the focal firm becomes less responsive due to the diminishing net benefits of improving operational activities. This second study complements the first by demonstrating that firms’ responses to non-punitive interventions are not homogeneous and can be influenced by information about sibling firms.
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