Market failure, information asymmetry, the case for regulation

This essay Market failure, information asymmetry, the case for regulation has a total of 597 words and 3 pages.


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Market failure, information asymmetry, the case for regulation



The Sarbanes-Oxley Act of 2002 was approved by the Congress after some big events of corporate scandals. Many big name companies like Enron,WorldCom and Tyco were involved in unethical activities as a result of a market failure. SOX stands for Sarbanes-Oxley Action, is a United States federal law that set expanded requirements for all U.S. public company and public accounting firms. The idea of SOX are largely adopted by big companies. If fact, many large public companies were required to meet the standard conditions of the SOX or they will face severe penalties. Ethical corporate government plays an important role in the concept of market failure. The author uses the example from Aristotle and Adam Smith to address the historical and philosophical context of the market failure problem. He examine the issue and proves that the measures of SOX is largely attributed to corporate bad behavior. The article is intended to provide readers a better understanding of the connection between corporation and our government. Sarbanes-Oxley proves to be an effective legislation that help to protect the investor from company fraud and help executives to improve ethical standards. Most importantly, it helps to reinforce the strength of the US market and make it a good place to work and invest.
According to the author, people usually look for solutions from the market because market offers ownership of the factors of production. This ownership attracts capitalist to fulfill his independence and wealth maximization. Author uses an example of an life experience from Adam Smith to further support his idea that the institutions of commerce provides oversight on the stabilization for our modern market. In the section “A framework for corporate bad behavior”,

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