{"id":{"repo_id":"texas","oai_identifier":"oai:repositories.lib.utexas.edu:2152/133753"},"canonical_url":"https://search.dev.ndltd.org/etd/texas/oai:repositories.lib.utexas.edu:2152/133753","repository":{"repo_id":"texas","name":"University of Texas","base_url":"https://repositories.lib.utexas.edu/server/oai/request"},"display":{"title":"Enforcement policy, disclosure regulation, and investment efficiency","abstract":"The optimal enforcement policy of disclosure regulation remains debated. Some regulators argue for targeting serious violations alone, while others advocate pursuing even the smallest infractions. This paper develops an analytical model to examine how a chosen enforcement policy affects a firm's project selection. In the model, the manager chooses between a riskier project and a safer project and decides whether to disclose information about the firm's final payoff. The regulator mandates disclosure and commits to either a focused enforcement policy (i.e., pursuing only severe violations) or a uniform enforcement policy (i.e., pursuing violations regardless of severity). The main finding is that a focused enforcement policy discourages the manager from taking risks while a uniform enforcement policy encourages risk-taking. Therefore, a uniform policy enhances investment efficiency when the riskier project is efficient; in contrast, a focused policy enhances investment efficiency when the safer project is efficient. This paper provides insights into the regulatory debate on enforcement policy.","abstract_html":"The optimal enforcement policy of disclosure regulation remains debated. Some regulators argue for targeting serious violations alone, while others advocate pursuing even the smallest infractions. This paper develops an analytical model to examine how a chosen enforcement policy affects a firm's project selection. In the model, the manager chooses between a riskier project and a safer project and decides whether to disclose information about the firm's final payoff. The regulator mandates disclosure and commits to either a focused enforcement policy (i.e., pursuing only severe violations) or a uniform enforcement policy (i.e., pursuing violations regardless of severity). The main finding is that a focused enforcement policy discourages the manager from taking risks while a uniform enforcement policy encourages risk-taking. Therefore, a uniform policy enhances investment efficiency when the riskier project is efficient; in contrast, a focused policy enhances investment efficiency when the safer project is efficient. This paper provides insights into the regulatory debate on enforcement policy.","abstract_has_math":false,"creators":["Chen, Yiying, Ph. 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