Lobbying and Uniform Disclosure Regulation
Henry L. Friedman
University of California, Los Angeles (UCLA) - Accounting Area
Mirko Stanislav Heinle
University of Pennsylvania - Accounting Department
July 23, 2015
This study develops a model to examine the costs and benefits of uniform versus individualized accounting regulation in the presence of political lobbying costs. The model suggests that uniform regulation creates a free-rider problem between lobbyists that reduces the economic distortions caused by lobbying. However, uniform regulation can prove costly by forcing the same treatment on heterogeneous firms. Therefore, a commitment to uniform regulation is socially beneficial when firms are sufficiently homogenous or the costs of lobbying to society are large. We extend the model and show that more uniform regulation can (partially) substitute for private corporate governance mechanisms but can also be (partially) undone when firms themselves can form lobbying groups to overcome the free-rider problem.
Number of Pages in PDF File: 43
Keywords: Securities, Regulation, Lobbying
JEL Classification: D72, G38, L51, M48
Date posted: July 15, 2012 ; Last revised: July 24, 2015
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