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

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