Agency rulemaking, political influences, regulation, and industry compliance

This article empirically examines the impact of congressionaloversight and agency rulemaking on firm compliance behaviorin FDA-regulated industries. Congressional oversight hearingsprovide signals to firms about future changes in regulatoryenforcement strategies. Agency rulemaking influences firms'incentives to comply with regulation because firms must investsignificant resources to keep up with changing agency policy.This analysis uses three-stage least squares to simultaneouslyestimate both the numbers of FDA inspections and industry violatorsbetween 1972 and 1994. Results show that congressional oversightdeters industry noncompliance. The effect of agency rulemakingon noncompliance differs between industries. For instance, anincreasing stock of human drug rules has raised compliance amongdrug firms because newer more, cost-effective rules have replacedolder, more costly rules. In contrast, the increasing stockof medical device rules has reduced industry compliance amongdevice firms because these rules have increased the complexityand the scope of regulation.     

Causality of interest rate,exchange rate and stock prices at stock market open and close in Hong Kong

By an ARIMA approach and verified by the Granger causality tests, the causality of daily interest rate, exchange rate and stock prices in Hong Kong were explored for the period 1986 to 1991. Depending on the subperiods being considered, sporadic unidirectional causality from closing stock prices to interest rate, and weak bi-directional causality between stock prices and the exchange rate were found. The overall evidence, however, appears to show that the Hong Kong market efficiently incorporated much of the interest rate and exchange rate information in its price changes both at daily market close and open.The author would like to acknowledge helpful comments from two anonymous referees, helpful suggestions by Dr Daniel Cheung and research assistance from Theresa Tam. This project is supported by a research grant from the Institute of Social Studies, The Chinese University of Hong Kong.