Using Stock Price Data to Measure the Effects of Regulation: The Interstate Commerce Act and the Railroad Industry

This article uses financial data to measure the effects of the passage of the Interstate Commerce Act of 1887 and subsequent legislative and judicial developments on firms in the railroad industry. The results indicate that the Interstate Commerce Act had a significant positive impact on railroad stock prices and that court decisions in the 1890s which severely restricted the powers of the Interstate Commerce Commission caused negative stock price reactions. These findings offer support for the revisionist view of regulatory history, according to which the railroads welcomed regulation as a means of facilitating the enforcement of cartel-like agreements.