Learning from Ecology: Financial Reporting as a ‘Commons’

Learning from Ecology: Financial Reporting as a ‘Commons’



Research in Accounting Regulation, June 2017


This note explores how the financial reporting environment is a common good put at risk by capital markets participants who have economic incentives to extract private benefits at the cost of the investing public. Disclosure of misleading financial information confers the prospect of economic gain for a few but pollutes the commons and reduces its usefulness for all. After showing how a variant of the prisoner’s dilemma may explain Enron-era scandals, the note discusses how U.S. government intervention was the only practical solution to repair damage to the financial reporting commons. The implication is that government involvement in financial reporting is here to stay.