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Different Approaches to Corporate Reporting Regulation: How Jurisdictions Differ and Why

68 Pages Posted: 30 Mar 2010 Last revised: 31 May 2010

Christian Leuz

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Center for Financial Studies (CFS); University of Pennsylvania - Wharton Financial Institutions Center; CESifo Research Network

Date Written: March 30, 2010

Abstract

This paper discusses differences in countries’ approaches to reporting regulation and explores the reasons why they exist in the first place as well as why they are likely to persist. I first delineate various regulatory choices and discuss the tradeoffs associated with these choices. I also provide a framework that can explain differences in corporate reporting regulation. Next, I present descriptive and stylized evidence on regulatory and institutional differences across countries. There are robust institutional clusters around the world. I discuss that these clusters are likely to persist given the complementarities among countries’ institutions. An important implication of this finding is that reporting practices are unlikely to converge globally, despite efforts to harmonize reporting standards. Convergence of reporting practices is also unlikely due to persistent enforcement differences around the world. Given an ostensibly strong demand for convergence in reporting practices for globally operating firms, I propose a different way forward that does not require convergence of reporting regulation and enforcement across countries. The idea is to create a “Global Player Segment” (GPS), in which member firms play by the same reporting rules and face the same enforcement. Such a segment could be created and administered by a supra-national body like IOSCO.

Keywords: Accounting, Regulation, IFRS, U.S. GAAP, SEC, Standard Setting, Mandatory Disclosure, Political economy

JEL Classification: G14, G15, G30, K22, M41, M42

Suggested Citation

Leuz, Christian, Different Approaches to Corporate Reporting Regulation: How Jurisdictions Differ and Why (March 30, 2010). Chicago Booth Initiative on Global Markets Research Paper No. 53; ECGI - Law Working Paper No. 156/2010. Available at SSRN: https://ssrn.com/abstract=1581472 or http://dx.doi.org/10.2139/ssrn.1581472

Christian Leuz (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-1996 (Phone)

HOME PAGE: http://faculty.chicagobooth.edu/christian.leuz/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org

European Corporate Governance Institute (ECGI)

Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

University of Pennsylvania - Wharton Financial Institutions Center

3641 Locust Walk
Philadelphia, PA 19104-6218
United States

CESifo Research Network

Poschinger Str. 5
Munich, DE-81679
Germany

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