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Return on equity is often associated with prudent risk-taking and the attraction of new clients in advanced economies like the United States, where shadow banks are not regulated. Researchers have contended that freedom from regulation encourages risk-taking and earning of higher profits, but there is a lack of empirical evidence addressing this relationship. The purpose of this quantitative study was to investigate whether lack of regulations result in increased return on equity. The theoretical framework was regulatory arbitrage by Ricks M, Gennaioli N, Shleifer A, and Vishny R. The research question addressed the relationship between regulation, profit margin, leverage, asset turnover, economic condition, and strategy, and the bottom-line of banks (traditional and shadow) as measured by return on equity. A quasi-experimental design was used to examine data from 42 annual returns filed using Security and Exchange Commission (SEC) Form 10-K from U.S. banks with Standard Industrial Classification (SIC) Code 6021 and 6211. Multiple regression was used to analyze the data. Results indicated that regulation did not show any significant correlation with the bottom-line of banks as measured by return on equity. However, there was a significant correlation between the bottom-line banks and other independent variables including profit margin, leverage, and asset turnover. This study contributes to positive social change by assisting regulators and lawmakers in improving their roles in regulating traditional and shadow banks, thereby reducing the likelihood of crises in the U.S. banking system.