In a post earlier this week, I situated the current debate over quarterly earnings reporting in the larger debate over mandatory disclosure.
In this post, I offer some suggestions for readers who would like to dive into the debate over mandatory disclosure in more depth.
SEC Securities Disclosure: Background and Policy Issues is a two page summary from the Congressional research Service that provides a pretty good albeit very concise summary of the debate.
Stephen M Bainbridge, Mandatory Disclosure: A Behavioral Analysis, 68 University of Cincinnati Law Review 1023 (2000) draws on the behavioral economics literature to ask whether systematic departures from rationality, such as herd behavior or the status quo bias, might result in a capital market failure. The paper concludes that such a market failure could occur, especially in emerging markets, but also contends that one should not jump to the conclusion that legal intervention in the form of a mandatory disclosure system is necessary, especially insofar as the highly evolved U.S. capital markets are concerned.
Frank H. Easterbrook & Daniel R. Fischel, The Economic Structure of Corporate Law (1996) is a seminal—albeit somewhat dated—introduction to and defense of the contractarian approach to corporate law. It devotes a chapter to a critique of mandatory disclosure.
John Armour et al., Principles of Financial Regulation (2016) considers the underlying policies and the objectives of finance regulation by drawing on economics, finance, and law methodologies. Several chapters discuss the debate over mandatory disclosure.
Paul G. Mahoney, Wasting a Crisis: Why Securities Regulation Fails (2016) incorporates a discussion of the mandatory disclosure debate into his larger argument that much securities regulation has been ineffective and/or counterproductive.
Allen Ferrell, The Case for Mandatory Disclosure in Securities Regulation Around the World (September 2004) argues that there are strong theoretical reasons to believe that mandatory disclosure requirements can play a socially useful role in countries with concentrated ownership structures.
Ann Lipton, Not Everything is About Investors: The Case for Mandatory Stakeholder Disclosure (August 10, 2019) recommends that we explicitly acknowledge the importance of disclosure for noninvestor audiences, and discuss the feasibility of designing a disclosure system geared to their interests.
James J. Park, Insider Trading and the Integrity of Mandatory Disclosure, 2018 Wisconsin Law Review 1133 (2018) argues that insider trading can undermine the integrity of the disclosure mandated by the securities laws. Such disclosure is meant to benefit all investors and should not be exploited by a few. Therefore protecting the integrity of mandatory disclosure is a compelling reason for insider trading regulation.1
With all due deference to my friend, coauthor, and UCLAW colleague, this is an argument I don’t buy. I explain why in my book Insider Trading Law and Policy: Concepts and Insights (2nd Ed. 2023).