Oxford Handbook of Corporate Law and Governance

This chapter offers new insights on the mechanisms and challenges of using disclosure as a corporate governance tool. The chapter describes the three primary channels through which disclosure improves governance: enhancing securities price accuracy, strengthening internal governance by shaping managerial behavior, and improving external governance by promoting investor oversight and market discipline. Disclosure’s expansion and success are due in part to its status as a lower-cost alternative to more intrusive means of achieving some of those goals. In providing an analytical framework, the chapter distinguishes between the private and social costs of disclosure mandates and explores the different functional mechanisms—informational, behavioral, and other—through which disclosure requirements affect governance. The chapter then identifies a number of challenges for disclosure’s effectiveness, including questions about the desirable attributes of disclosure rules; the role and meaning of materiality; the appropriate treatment of commercially sensitive information; the effects of AI technology; the “information overload” hypothesis; the nexus between disclosure requirements and First Amendment protections; the challenges in performing cost-benefit analysis of disclosure rules; and the potential distortions caused by the application of disclosure rules to different types of firms. While disclosure is an essential corporate governance tool, its future effectiveness and availability are not guaranteed.

George S. Georgiev, Disclosure as a Corporate Governance Tool: Channels and Challenges Oxford Handbook of Corporate Law and Governance (2025).