Mandatory disclosure sits at the foundation of modern securities regulation. Public companies must produce and share a wide variety of information about their condition and prospects, and they must do so on their own dime.
There can be little doubt that corporate information has great social value. Much has been written on the connection between more informative securities prices, on the one hand, and improved capital allocation and corporate governance, on the other. Nevertheless, it is equally as clear that having the government dictate the amount, format, and timing of corporate disclosure will leave society with less than the optimal … Read more
Corporate information that moves stock-market prices has long sat at the center of modern securities regulation in the United States. The Great Depression-era securities laws at the foundation of the field require much mandatory disclosure of this type of information. They also include a strict anti-fraud regime to ensure the credibility of those disclosures of that information. And for a half century now, that regime has been interpreted to prohibit insiders from trading on the same information. All of these laws have been motivated by both concerns for fairness and economic efficiency.
Today, a new body of securities law is … Read more
The following post comes to us from Kevin S. Haeberle, Post-Doctoral Research Scholar, Program in the Law & Economics of Capital Markets, Columbia Law School & Columbia Business School.
It is well understood that society is better off when public companies’ stock prices are more accurate—that is, when stock prices better reflect firms’ actual values. Enhanced stock-price accuracy, the argument goes, leads to improved corporate governance and capital allocation—thereby increasing social wealth. But it is widely believed that those who make stock prices more accurate are unable to capture the full social benefits of their work—meaning that market forces, … Read more