Matthias Dahm
The enforcement of mandatory disclosure rules
Dahm, Matthias; González, Paula; Porteiro, Nicolás
Authors
Paula González
Nicolás Porteiro
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.
Citation
Dahm, M., González, P., & Porteiro, N. (2018). The enforcement of mandatory disclosure rules. Journal of Public Economics, 167, 21-32. https://doi.org/10.1016/j.jpubeco.2018.08.014
Journal Article Type | Article |
---|---|
Acceptance Date | Aug 23, 2018 |
Online Publication Date | Sep 16, 2018 |
Publication Date | Nov 30, 2018 |
Deposit Date | Sep 10, 2018 |
Publicly Available Date | Mar 28, 2024 |
Journal | Journal of Public Economics |
Print ISSN | 0047-2727 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 167 |
Pages | 21-32 |
DOI | https://doi.org/10.1016/j.jpubeco.2018.08.014 |
Keywords | Strategic information; Transmission; Scepticism; Confidence effect; Monitoring; Penalty; Fine; Sanction; Detection probability |
Public URL | https://nottingham-repository.worktribe.com/output/1068249 |
Publisher URL | https://www.sciencedirect.com/science/article/pii/S0047272718301580?dgcid=rss_sd_all |
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