Voting over disclosure standards

This article examines the nature of disclosure standards, under the assumption that (i) standards preferred by more firms are collectively chosen and (ii) privately informed firms prefer standards that increase market perceptions about the value of their assets. A standard is stable if it is preferred by a large enough supermajority of firms over any other standards. Absent any restriction on possible standards, only unanimity would make a standard stable. By contrast, choosing standards that classify news from best to worst, there is at most a single stable standard, and it must be full disclosure. For a large class of distributions over valuations, the required supermajority is about two thirds, close to the majority required in many standard-setting boards. Distributions with heavy tails, such as news that contains extreme risks, require higher super majorities to be stable. These insights are robust to certain settings in which the information is used in decision-making