How Enforcement Affects Disclosure

The ability of disclosure rules to provide investors, consumers, and the public with useful information depends largely on how well the rules are enforced. Strong enforcement helps ensure the provision of information and increases companies’ desire for mandatory disclosure. In a new article, we offer a model of mandatory disclosure regulation and enforcement and analyze four essential questions the model raises.

Which firms are willing to disclose voluntarily in the absence of mandatory disclosure?

In his famous article, “Market for Lemons,” Akerlof (1970) argues that markets can collapse because of information asymmetry. Persistent information asymmetry where, for example, no seller … Read more