6. Concluding remarks
Corporations that issue securities to the general public are required to produce financial statements that comply with
generally accepted accounting standards, to file special supplementary disclosures with regulatory bodies and to employ an
auditor to issue an opinion in compliance with generally accepted auditing standards. This study develops insights into the
endogenous determination of mandatory disclosure and, in particular, whether a disclosure rule exists that conforms to the
preference of a majority of managers interested in maximizing current market prices. The main finding is that such
mandatory disclosure tends to be asymmetric in two respects: first, it favors disclosure of unfavorable information, and
second, it overweights the private interest of managers with relatively favorable information even when requiring the
disclosure of less favorable information serves no direct productive purpose. These two findings are robust to involvement
by other parties, whether voluntary disclosures are possible and whether post-disclosure (i.e., productive) decisions rely on
public disclosures.
Accounting research has long struggled with understanding policy, often assuming that observed reporting requirements
are either exogenous or the product of a quasi-experimental process whose consequences can be examined in isolation of its
environment. Our approach offers a starting point for a rigorous analysis of the causal determinants of policy. This broader
research agenda can take us closer to an understanding of the institutions that surround accounting policy and, in particular,
answer questions such as why we see commonalities in reporting rules and what frictions can affect the output of the rulemaking
process. In doing so, we hope that researchers can achieve a more direct look at the accounting institution that
writes accounting rules rather than only focus on its output.
More research is needed to clarify the causes of regulation and formulate a complete set of testable determinants. As a
byproduct of our focus on reporting concerns, we have left aside open questions about other roles of information which
range from stewardship in the context of conflict of interests between managers and shareholders to other choices such as
capital structure or product market competition. Further, we do not provide here a detailed model of the decision process
within the policy-making bodies, and more reflection will be necessary to understand whether certain institutional
structures might be more effective than others.