The political economy of mandatory disclosure: a literature review

Reviewing the literature on mandatory corporate disclosure from a political economy perspective, we synthesize the classic justifications for disclosure regulations while emphasizing why voluntary disclosure often fails to achieve socially efficient transparency. We also highlight how legal institutions, enforcement capacity, and political forces shape the design, credibility, and effectiveness of disclosure mandates. Drawing on evidence from international and China-focused studies, we review empirical findings on how mandatory disclosure affects investor protection, information environments, and firm behavior, showing that similar reporting rules yield different outcomes across institutional settings. We further extend the discussion to ESG and climate-related disclosure to examine emerging evidence on transparency gains, real effects, compliance costs, and regulatory trade-offs, including debates on materiality and regulatory objectives. Overall, the literature suggests that mandatory disclosure remains a central governance instrument in modern capital markets, but its effectiveness depends on its enforcement, institutional context and political economy constraints.