Accuracy Enhancement, Agency Costs, and Disclosure Regulation
Michael D. Guttentag
Loyola Law School Los Angeles
Review of Law and Economics, Vol. 3, No. 2, 2007
Loyola-LA Legal Studies Paper No. 2008-38
This article develops a model in which firms may commit to disclose varying amounts of two types of information, accuracy information and agency information, and in which a regulator may also mandate disclosures. The resulting analysis provides a way to better understand the complex relationship between disclosure regulation and social welfare, including issues such as: how disclosure regulation can generate social welfare gains (contra Dye, 1990; Admati & Pfleiderer, 2000), why imposing disclosure requirements on only certain firms and certain information may be efficient, and why stricter mandatory disclosure requirements may be an efficient regulatory response to more robust public securities markets (contra La Porta, Lopez de Silanes, & Shleifer, 2006).
Number of Pages in PDF File: 31
Keywords: agency costs, disclosure regulation, interfirm externalities
JEL Classification: D62, G38, K22, M40Accepted Paper Series
Date posted: August 30, 2005 ; Last revised: July 24, 2010
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