Mandatory accounting disclosure by small private companies

• Published in: European journal of law and economics 2011-12, Vol.32 (3), p.377-413
• Main Author: Arruñada, Benito
• Format: Article
• Language: English
• Subjects: Accounting; Accounting methods; Accounting procedures; Accounting standards; Auditing standards; Balance sheets; Business accounting; Business simplification; Commercial Law; Company accounts; Cost-benefit analysis; Costs; Credit registries; Disclosure; Economic theory; Economics; Economics and Finance; Employees; Equity; European Integration; Financial disclosure; Financial reporting; G32; Information systems; K22; Law and Economics; M48; Public companies; Public Finance; Small and medium sized enterprises; Small business; Stock exchanges; Studies; Technological change
• ISSN: 0929-1261; 1572-9990; 1572-9346
• DOI: 10.1007/s10657-010-9145-3

This article analyzes how mandatory accounting disclosure is grounded on different rationales for private and public companies. It also explores technological changes, such as computerised databases and the Internet, which have recently made disclosure of company accounts by small companies potentially less costly and more valuable, thanks to electronic filing and universal online access to credit information systems. These recent developments favour policies that would expand the scope of mandatory publication for small companies in countries where it is voluntary. They also encourage policies to reduce the costs and enhance the value of disclosure through administrative reforms of filing, archive and retrieval systems. Survey and registry evidence on how the information in the accounts is valued and used by companies is consistent with these claims about the evolution of the tradeoff of costs and benefits that should guide policy in this area.