This chapter starts with the central puzzle of this book: Why do governments choose blunt force regulation to control pollution when more reasonable, sustainable solutions are possible? It proposes that governments choose this suboptimal approach because they seek, first and foremost, to overcome principal–agent problems within the state apparatus. Drawing on case research and interviews with government officials around China, this chapter illustrates how blunt force regulation creates shortcuts that allow political leaders to increase the credible threat of punishment towards noncompliant bureaucrats. These measures temporarily scare local authorities into enforcing policies as ordered, even after prolonged periods of noncompliance. Finally, this chapter offers some observable implications for this theory, which will be tested in ensuing chapters.

This chapter contains intermediary results from the analysis on legal deficiencies identified in the accounting, corporate, and securities law. It focuses on the misguiding norm of adding new topics to disclosure agendas without careful consideration of the value the addition of information may bring. This leads to increased compliance costs, “boilerplate compliance,” and information overload. In addition, more information may give the impression of enhanced group transparency such as the amended disclosure regime for major holdings in listed companies, where the reality is that innovative business models still fly under the regulatory radar.