We use textual analysis of mandatory accounting filings to develop firm-level, time-varying measures of exposure to individual government agencies. The measures vary predictably across industries and with broad regulatory interventions that expanded the scope and power of different government agencies, but also include substantial firm-specific, time-varying components. These components positively relate to undisclosed agency investigations and to financial statement downloads. Consistent with exposure to government agencies imposing net costs on firms, firms’ overall exposure negatively relates to their profitability and positively relates to their future returns. Consistent with a causal interpretation of these results, we find that the positive stock market reaction to the surprise election of Donald Trump, who promised to reduce the power and scope of government agencies, positively varies with firms’ ex ante exposure to government agencies. The negative relation between exposure to government agencies and profitability is particularly significant for certain agencies, highlighting the benefits of an agency-specific measure. Highlighting the benefits of a firm-year measure, we find that firms’ profitability positively relates to their competitors’ exposure to government agencies, consistent with exposure to government agencies reallocating resources within industries.
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