Mandatory Disclosure as Credible Commitment: Going Public, Opting in, Opting Out and Globalization

Posted: 10 Feb 1999

See all articles by Edward B. Rock

Edward B. Rock

New York University School of Law; European Corporate Governance Institute

Date Written: September 9, 1998

Abstract

What functions does the existing mandatory disclosure system serve? In this article, I argue that the existing SEC system can be understood as providing issuers with a mechanism for making a credible commitment to high quality, comprehensive disclosure for an indefinite period into the future. This credible commitment device is particularly useful to new domestic issuers and to foreign issuers seeking to tap the U.S. capital markets. This credible commitment justification explains the striking but little discussed asymmetry between the ease of entry into the SEC system and the difficulty of exit from it. I then consider the implications of this credible commitment view for the various proposals on securities disclosure in a global capital market, and the tradeoffs between the potential benefits of increasing competition among suppliers of disclosure regulation and the potential loss of the ability of any system to offer credible commitment.

JEL Classification: G31, G32

Suggested Citation

Rock, Edward B., Mandatory Disclosure as Credible Commitment: Going Public, Opting in, Opting Out and Globalization (September 9, 1998). Available at SSRN: https://ssrn.com/abstract=145528

Edward B. Rock (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

European Corporate Governance Institute ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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