An Argument for Imposing Disclosure Requirements on Public Companies

Abstract:     
This Article addresses the lack of adequate justification for federally imposed disclosure requirements by starting de novo, and considering anew which, if any, disclosure requirements should be imposed on public companies. To do this, the significant costs and benefits of public company disclosures are identified. Then a market failure argument for regulating public company disclosures is developed. Finally, this framework is used to evaluate a specific disclosure requirement. The analysis leads to a surprising conclusion. Federal public company disclosure requirements are inadequate in at least one important respect, not because there are too many disclosure requirements, but because there are too few. Public company managers should be required to disclose substantially more of the information they use to manage their firms' operations than they are currently required to disclose.

Number of Pages in PDF File: 74

Keywords: Disclosure, regulation

JEL Classification: K22, L51

Accepted Paper Series