Regulatory sensitivity index: a metric to assess the impact of regulation on publicly traded firms in Brazil

Abstract

Context: regulation remains a complex and multifaceted area of inquiry, with ongoing debates in the economic literature concerning its determinants, mechanisms, and effects. To contribute to a more comprehensive understanding of the topic—extending beyond the confines of a purely economic perspective—this study introduces a methodological framework for quantifying the regulatory burden on publicly listed firms in Brazil. The framework results in the development of an index designed to facilitate cross-sectoral comparisons of the relative weight of regulation across companies operating in distinct segments of the national economy.

Objective: the objective of this article is to propose and apply a set of indicators that measure, in a comparative manner, the relative weight of regulation on publicly traded companies in Brazil, considering the regulatory intensity by firm, industry, and market. Although it does not constitute a direct metric of economic or competitive impact, the index provides subsidies for further studies on the relationship between regulation, corporate strategy, and sectoral performance, and may also contribute to analyses regarding the regulatory effects on competitive dynamics in different segments of the economy.

Method: to identify such behavior that distances the effect of regulation on the firm in relation to the industry in which it reports operating, the concept of Level of Distancing from Industry (NDI) was used, which assesses how close or distant the company is from the index of its industry.

Conclusions: the study identified clusters of company behavior in relation to the weight of state regulation, which helps in understanding the strategies of companies in adapting to regulatory aspects in Brazil.