A Pox on Both Your Houses: Enron, Sarbanes-Oxley and the Debate Concerning the Relative Efficiency of Mandatory Versus Enabling Rules

Abstract

The main point of this Article is that the "demand-side" of U.S. capital markets is not functioning effectively, at least with respect to certain kinds of information. This, in my view, is the major lesson that should be taken from the recent spate of corporate debacles, most notably the collapse of the Enron Corporation. The "policy surprise" behind these scandals is not that there has been corruption inside so many U.S. companies. The "policy surprise" is that the vaunted U.S. capital markets did such a poor job in uncovering these scandals.