Definition of Legislative Risk

Legislative Risk is the risk that the government may do something that adversely affects the value of an investment.

Applying "Legislative Risk" to Securities Exams:

If the Governement enacts legislation that changes the regulatory enviornement a corporation operating in that affected area may see thier business and earnings fall as a result. Utility, Oil and Gas, Banking and Tobacco companies are all examples of industies where legislation that have caused earnings to fall as a result of legislative changes.

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