The Positive Theory of Disclosure Regulation: In Search of Institutional FoundationsCoauthor(s): Jeremy Bertomeu.
Institutions shape the nature and form of accounting rules; yet, a positive theory that links the standard-setting institution to observed standards has so far remained elusive. Here, we examine three stylized institutional forms: office-driven politicians, private-sector self-regulation and a mission-driven standard-setter. The form of the institution has dramatic consequences on the implemented disclosure regulation, and may lead to no-disclosure, full-disclosure, or conservative-like disclosures of only bad news. In the presence of excessive political interference, the institution does not maximize investors’ surplus and the implemented regulation may become unrelated to the ex-ante cost and benefits of information. What we suggest is this: accounting regulation must be done by a strong and politically-independent body.
Source: The Accounting Review
Cheynel, Edwige, and Jeremy Bertomeu. "The Positive Theory of Disclosure Regulation: In Search of Institutional Foundations." The Accounting Review 88, no. 3 (2013): 789-824.