Would unregulated stock markets disclose financial information?

Economics Economics Questions
1

In each finance class I’ve had so in grad school far my professors would have this to say about par value of stocks…“it’s irrelevant,don’t worry about it”.

This semester, my professor spent much more time elaborating on it.

Basically, prior to the securities act of 1933, publically traded companies refused to disclose their financial statements to the public (including its own owners). If you were an owner of a firm and called up and asked to see the books, they would tell you “sorry that’s proprietary information.”

The only thing you had as an investor to help you decided if a firm was worth investing in was its quarterly dividends. So stocks essentially acted much more like bonds. In fact at one point in time bonds were called fixed dividend stocks (or something like that), where stocks were variable dividend stocks. Thus if you invested in a stock, you were taking a very high risk. This is where par value comes in.

To help alleviate some of the risk, par value served as the floor beyond which a stock price could not fall. If stock price fell below par value, the firm would have to liquidate. So while as owner you weren’t allowed to see the books, you were at least garunteed that you wouldn’t lose everything.

The securities act of 1933 changed all that and required firms to disclose financial statments rendering par value meaningless. Par values continued to stay around $100 or so until state governments decided to tax corporations based on a percentage of par value, at which point most corporations just lowered par value down to a penny or eliminated it all together to avoid paying taxes.

My question is, given that this was how the market looked in unregulated form, do you believe this is how the stock market would look today if(when) we eliminate all regulation (that is, no financial statements)? Does anyone believe the market would have transitioned to disclosing financial statments on its own without regulation? Or would owners still be in the dark about their firms performance, relying on par value to offset risk?

I’m looking for personal opinions/reseasons for such beliefs, not “that’s for the market to decide”, which is obvious.

2

Off topic but, you are the guy who created that t-shirt design in your avatar right? I remember liking the story behind it.

Anyhow, I think that both par and non-par would persist. We have the internet now and people crave information like this. When I talk to people about anarchy, I point out that a lack of rulers doesn’t mean a lack of the rule of law. There would certainly be some sort of regulation that would crop up as how UL has succeeded in private consumer safety. You might see arms of companies operate as both and a whole brand name’s “stock” function similarly to an equity-indexed annuity, got me. There was a blip in the WSJ a couple days ago from the ex-CEO of Sun, and I really forget the whole story behind this, but he said something to the effect of: “I’d love to be back to managing a company, but only if it is privately held.” He basically said that he was fired by regulators.

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Things like that affect the price that can be gotten for issued stock.