Making a Market for Corporate Disclosure

Abstract

It has long been said that market forces alone will result in a problematic
under-sharing of information by public companies. Since the 1930s, the main
regulatory response to this market failure has come in the form of the massive
mandatory-disclosure regime that sits at the foundation of modern securities
law. But this regime—especially when viewed along with its speech-chilling antifraud
overlay—no doubt leaves society without all the corporate information
from which it would benefit. The typical fix offered to the problem has been more
of the same: add to the 100-plus-page list of what firms must disclose, often
based on the latest Washington fad.

This Article argues that the underproduction of corporate information
could be better addressed through constructing an information market. In
particular, we theorize that an SEC rule regarding selective disclosure
(Regulation Fair Disclosure) and a more general regulatory attitude relating to
the same prevent this market from forming today, and that changes to them
would allow firm supply and information-consumer demand to interact in a way
that would motivate more corporate disclosure, presented in enhanced formats,
delivered more frequently. Thus, the Article provides regulators with an
innovative and far-reaching tool for use in their long struggle to get socially
valuable information out beyond firms

Keywords: Corporate Disclosure, Securities Regulation