– Whenever a tax increase occurs regarding redistribution, a decrease in the cash flow rights of shareholders is imminent. Such decrease would result in a significant investor protection diminishment. (To Steal or Not to Steal: Firm Attributes, Legal Environment, and Valuation By: Art Durnev and E. Han Kim)
– Another important political factor is the changes in the Environmental legislation. If there is an increase in regulatory costs, this could affect negatively on the market, and there could be a fall in the stock prices. (Journal of Accounting, Auditing & Finance Date: March 1, 1997 WALTER G. BLACCONIERE*W. DANA NORTHCUT**)
The regulatory environment is the set of taxes, rules, and laws or regulations that businesses must adhere to. For example, a lax regulatory environment is often associated with free-market, conservative economics and involves little government involvement. A tougher regulatory environment is often associated with progressive economics, which can include rules limiting hours worked, higher taxes, and other restrictions on businesses.