Discussion on Corporate Reporting regulation: a brief note

Based on Leuz (2010), I note the following ideas and concerns as related to the topic of Corporate Reporting Regulation:

1. Different approaches to reporting regulation and corporate reporting system design choices
• Why do we regulate?
• Benefit 1: the existence of externalities
• Benefit 2: market-wide cost savings from regulation
• Benefit 3: Insufficient private sanctions
• Benefit 4: dead-weight costs from fraud and agency conflicts that could be mitigated by disclosure
• Cost of reporting regulation: enforcement cost
• Who do we regulate and what is the reporting regulation goal?
• Who: publicly traded firms, private limited companies?
• Goal:
• Provide disclosure to individual investors; these days: a large fraction of households' stock ownership has migrated to financial intermediaries.
• To protect small and unsophisticated individual investors against better informed insiders & promoters.
• To protect creditors by restricting dividends and other payments to residual claimants.
• To preserve the stability of the financial system and investors' confidence in financial markets.
• Who should regulate and at what levels?
• Who: Private reporting regimes and private standard-setters vs public regulators
• At what levels: creation of reporting regimes at the exchange, state, country or supranational level
• What information should be reported and how much discretion do firms have?
• How are the rules enforced?
2. Independencies among regulatory choices
• Interdependencies between reporting rules and enforcement
• Idea of institutional complementarities

I refer you to Leuz (2010) for a detailed discussion of the ideas noted here.


Reference
Leuz, C. (2010) "Different approaches to corporate reporting regulation: how jurisdictions difer and why", Accounting and Business Research  40(3), pp. 229-256.