Why would proponents of free markets believe that financial reporting regulation leads to an
overabundance of accounting rules and standards?
Ans.
Free-market advocates say that if users of financial accounting information are not compelled to pay for
it, they would likely to exaggerate their wants and needs for information in order to persuade regulators
to impose more disclosures. According to proponents of free markets, this adds extra costs to businesses
since they will produce information that customers would not seek if they knew they would have to pay
for it. Accounting information, according to free-market advocates, should be handled like other goods,
with supply and demand forces free to determine the optimal quantity of information to offer.