Securities Regulation as Lobster Trap: A Credible Commitment Theory of Mandatory Disclosure

30 Pages Posted: 22 May 2002 Last revised: 28 Jan 2012

See all articles by Edward B. Rock

Edward B. Rock

New York University School of Law; European Corporate Governance Institute

Date Written: January 27, 2012


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 practical and formal 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.

Keywords: Mandatory Disclosure, Securities Disclosure, Credible Commitment, Disclosure Regulation

JEL Classification: G3, K22

Suggested Citation

Rock, Edward B., Securities Regulation as Lobster Trap: A Credible Commitment Theory of Mandatory Disclosure (January 27, 2012). Cardozo Law Review, Vol. 23, p. 675, 2002, U of Penn, Inst for Law & Econ Research Paper No. 02-05, Available at SSRN:

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

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