Introduction

This book explores mandatory disclosures. The book starts by asking the question why do we need mandatory disclosures. First, it develops a framework using a principal-agent model that provides an economic rationale for such disclosures. Second, it analyses the requirements outlined in Basel banking regulations over three decades and finds support for the propositions outlined in the developed framework in all key BCBS pronouncements. Last, the book empirically evaluates Pillar 3 disclosures and arrives at the surprising result that such disclosures do not seem have an impact on bond investors; a conclusion that seems to be borne out by the recent failure of Silicon Valley Bank and Credit Suisse. The book concludes by outlining the policy implications regarding the design, efficacy, implementation and limitations of regulation in an economy.