The enforcement of mandatory disclosure rules

Matthias Dahm, Paula González and Nicolás Porteiro

Journal of Public Economics, 2018, vol. 167, issue C, 21-32

Abstract: This paper examines the incentives of a firm to invest in information about the quality of its product and to disclose its findings. If the firm conceals information, it might be detected and fined. We show that optimal monitoring is determined by a trade-off. Overall, stricter enforcement reduces the incentives for selective reporting but crowds out information search. Our model implies that there are situations in which the relationship between the two monitoring instruments might be complementary. We also show that the welfare effects of mandatory disclosure depend on how it is enforced and that imperfect enforcement (in which some information remains concealed) might be optimal. In particular, the optimal fine might be smaller than the largest possible fine, even though the latter requires lower resource costs for inspections.

Keywords: Strategic information transmission; Scepticism; Confidence effect; Monitoring; Penalty; Fine; Sanction; Detection probability (search for similar items in EconPapers)
JEL-codes: D82 L15 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272718301580
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Enforcement of Mandatory Disclosure Rules (2018)
Working Paper: The Enforcement of Mandatory Disclosure Rules (2016)
Working Paper: The Enforcement of Mandatory Disclosure Rules (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:167:y:2018:i:c:p:21-32

DOI: 10.1016/j.jpubeco.2018.08.014

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().