Toward a Positive Theory of Disclosure Regulation: In Search of Institutional Foundations

46 Pages Posted: 23 Sep 2012 Last revised: 17 Aug 2013

See all articles by Jeremy Bertomeu

Jeremy Bertomeu

University of California, San Diego (UCSD) - Rady School of Management

Edwige Cheynel

University of California, San Diego (UCSD) - Rady School of Management

Date Written: September 22, 2012

Abstract

This article develops a theory of standard-setting in which accounting standards emerge endogenously from an institutional bargaining process. It provides a unified framework with investment and voluntary disclosure to examine the links between regulatory institutions and accounting choice. Disclosure rules tend to be more comprehensive when controlled by a self-regulated professional organization than when they are under the direct oversight of elected politicians. These institutions may not implement standards desirable to diversified investors and, when voluntary disclosures are possible, allowing choice between competing standards increases market value over a single uniform standard. Several new testable hypotheses are also offered to explain differences in accounting regulations.

Keywords: capital market, disclosure, accounting standards, standard-setting, theory

JEL Classification: C78, D02, D04, D71, D72, D79, G28, L51, M41, M48

Suggested Citation

Bertomeu, Jeremy and Cheynel, Edwige, Toward a Positive Theory of Disclosure Regulation: In Search of Institutional Foundations (September 22, 2012). The Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2150474 or http://dx.doi.org/10.2139/ssrn.2150474

Jeremy Bertomeu (Contact Author)

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Edwige Cheynel

University of California, San Diego (UCSD) - Rady School of Management ( email )

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