Luca Enriques, Gerard Hertig, Reinier Kraakman, and Edward Rock
- Published in print:
- 2017
- Published Online:
- March 2017
- ISBN:
- 9780198739630
- eISBN:
- 9780191837982
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198739630.003.0009
- Subject:
- Law, Company and Commercial Law
This chapter focuses on the regulation of corporations as “issuers,” that is, as tools to raise finance from the public. All representative “core jurisdictions” have specific rules applying to the ...
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This chapter focuses on the regulation of corporations as “issuers,” that is, as tools to raise finance from the public. All representative “core jurisdictions” have specific rules applying to the offer of securities to the public and to the ongoing governance and disclosure of companies whose securities are held by the investing public. While motivated by the need to protect investors, their economic function is rather in supporting capital markets as an efficient tool to allocate capital among corporations. This requires that markets are informationally efficient and prices are sufficiently informative. After reviewing the reasons why legal rules are held to be necessary to attain of the goal of price informativeness, the chapter examines mandatory disclosure frameworks. It highlights similarities and differences in issuer disclosure rules, assesses the degree of convergence in accounting law, and describes the use of other strategies, including banning insider trading and market manipulation (i.e., securities fraud). Public and private enforcement and gatekeeper control are examined, highlighting the gap in enforcement intensity between the U.S. and other jurisdictions.Less
This chapter focuses on the regulation of corporations as “issuers,” that is, as tools to raise finance from the public. All representative “core jurisdictions” have specific rules applying to the offer of securities to the public and to the ongoing governance and disclosure of companies whose securities are held by the investing public. While motivated by the need to protect investors, their economic function is rather in supporting capital markets as an efficient tool to allocate capital among corporations. This requires that markets are informationally efficient and prices are sufficiently informative. After reviewing the reasons why legal rules are held to be necessary to attain of the goal of price informativeness, the chapter examines mandatory disclosure frameworks. It highlights similarities and differences in issuer disclosure rules, assesses the degree of convergence in accounting law, and describes the use of other strategies, including banning insider trading and market manipulation (i.e., securities fraud). Public and private enforcement and gatekeeper control are examined, highlighting the gap in enforcement intensity between the U.S. and other jurisdictions.
