CHAPTER 12 Standard Setting: Economic Issues. Cory Bettel ∙ Jeff Chang ∙ Danielle Dodd Ryan Gruenspan ∙ Victoria Kavanagh ∙ Sally Regenstreif. AGENDA. OVERVIEW. Standard Setting : The regulation of firm’s external information production decisions by a regulator.
Standard Setting: Economic Issues
Cory Bettel ∙ Jeff Chang ∙ Danielle Dodd
Ryan Gruenspan∙ Victoria Kavanagh ∙ Sally Regenstreif
Standard Setting: The regulation of firm’s external information production decisions by a regulator.
Fundamental problem is discerning the socially “right” amount of information
Externality: An action taken by a firm or individual that imposes costs or benefits on others for which the creating entity is not charged or does not receive revenue.
Free-riding: The receipt of a firm or individual of a benefit from an externality
Darrough and Stoughton: monopolies keeps certain information private to deter entry
If markets work well, shareholders will unanimously be in favour of the manager maximizing the market value of the firm
Though it is a basic & strong argument that firms will release news, it easily breaks down in a number of situations
Signaling: An action taken by a high-type manager that would not be rational if that manager was low-type.
The theory is relatively unproven and many researchers still disagree today