Abstract
Whether or not the disclosure of a firm’s accounting data should be mandatory is one of the most controversial topics debated in law and economics. The positions taken are quite diverse (Easterbrook and Fischel, 1991, pp.276-314):
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The market view: If investors prefer firms which deliver reliable and detailed information about their current position and future prospects, then the better the public accounting information provided by a firm, the lower the firm’s capital cost will be. Each firm will thus have a natural incentive to disclose information: there will be no need for regulation that makes disclosure mandatory.
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The regulator’s view. The advocates of regulation argue that legislation requiring the disclosure of a certain amount of accounting data in a well defined format is necessary. Otherwise, the self-interest of managers would lead them not to disclose true and fair information, but rather to adopt a marketing approach where managers let the public know what they want them to know and keep secret what they don’t want the public to be aware of.
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Schredelseker, K. (2001). Is the Usefulness Approach Useful? Some Reflections on the Utility of Public Information. In: McLeay, S., Riccaboni, A. (eds) Contemporary Issues in Accounting Regulation. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-4589-7_8
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DOI: https://doi.org/10.1007/978-1-4615-4589-7_8
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