Making a Market for Corporate Disclosure

Abstract

It has long been said that market forces alone will result in a problematic under-sharing of information by public companies. Since the 1930s, the main regulatory response to this market failure has come in the form of the massive mandatory-disclosure regime that sits at the foundation of modern securities law. But this regime—especially when viewed along with its speech-chilling antifraud overlay—no doubt leaves society without all the corporate information from which it would benefit. The typical fix offered to the problem has been more of the same: add to the 100-plus-page list of what firms must disclose, often based on the latest Washington fad. This Article argues that the underproduction of corporate information could be better addressed through constructing an information market. In particular, we theorize that an SEC rule regarding selective disclosure (Regulation Fair Disclosure) and a more general regulatory attitude relating to the same prevent this market from forming today, and that changes to them would allow firm supply and information-consumer demand to interact in a way that would motivate more corporate disclosure, presented in enhanced formats, delivered more frequently. Thus, the Article provides regulators with an innovative and far-reaching tool for use in their long struggle to get socially valuable information out beyond firms.

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