Making a Market for Corporate Disclosure
92 Pages Posted: 25 Jul 2016 Last revised: 24 Feb 2017
Date Written: February 23, 2017
One of the core problems that law seeks to address relates to the sub-optimal production and sharing of information. The problem manifests itself throughout the law — from the basic contracts, torts, and constitutional law settings through that of food and drug, national security, and intellectual property law. Debates as to how to best ameliorate these problems are often contentious, with those on one end of the political spectrum preferring strong government intervention and those on the other calling for market forces to be left alone to work.
When it comes to the generation and release of the information with the most value for the economy (public-company information), those in favor of the command-and-control approach have long had their way. Exhibit A comes in the form of the mandatory-disclosure regime around which so much of corporate and securities law centers. But this approach merely leaves those who value corporate information with the government’s best guess as to what they want. A number of fixes have been offered, ranging from more of the same (adding to the 100-plus-page list of what firms must disclose based on the latest Washington fad), to the radical (dump the federal regime and its fraud and insider-trading overlays altogether in favor of state-level regulation). This Article, however, offers an innovative approach that falls in middle of the traditional spectrum: Make relatively small changes to the law to allow a market for tiered access to disclosures, thereby allowing firm supply and information-consumer demand to interact in a way that would motivate better disclosure. Thus, we propose a market for corporate disclosure — and explains its appeal.
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