Legislative Financial Asset Disclosure, Firm Motivations, and Macroeconomic Outcomes in the US States

ABSTRACT Financial asset disclosure laws are widely implemented to combat conflicts of interest among policymakers, yet their economic impact remains poorly understood. This study provides the first comprehensive analysis of how these transparency measures affect macroeconomic outcomes across the 50 US states. We theorize that these disclosure and recusal laws could have divergent impacts on macroeconomic performance: they might enhance economic outcomes by curtailing the exploitation of political connections by business firms, or conversely, they could impede economic growth by altering firm behavior and deterring business leaders from seeking public office, thereby potentially reducing the pool of economically savvy policymakers. Using new data on state‐level disclosure policies, we find that asset disclosure laws are associated with a worsening macroeconomic environment in states. To uncover the mechanisms driving these counterintuitive results, we conduct two pre‐registered survey experiments with 2000 small business owners. Our experimental evidence suggests that stringent disclosure requirements deter business investment and expansion. This research has implications for legislative challenges for legislative design, transparency, and economic policy.