When consumers lack adequate information to make informed choices, governments frequently step in to require that firms provide information. In the United States, we are all familiar with the mandatory nutritional information placed on food products. The Securities and Exchange Commission that monitors American stock markets forces firms to meet certain reporting requirements before their stock can be listed on exchanges such as the New York Stock Exchange. Such reporting helps ensure that private investors have reliable information on which to base their investment decisions. Often, however, these regulations do not work adequately, as the Enron scandal in 2001 clearly illustrates. The oil trading company Enron had cooked its books to overstate its profitability in its mandated reports. One outcome of Enron’s subsequent financial collapse was the introduction of new regulations designed to improve the reliability of the information that companies must provide to the public.
* mandatory: 의무적인 ** subsequent: (결과로서) 일어나는