Job Market Paper
Prosocial Disclosure and Contracts
Abstract: This paper studies prosocial disclosure (e.g., ESG reporting) and prosocial contracts (e.g., sustainability-linked loans) in a multitasking principal–agent framework with limited liability and private agent types. The agent exerts costly effort on two tasks: one yielding an unverifiable outcome and another generating an outcome that can be verifiably disclosed at a cost. The agent’s private type captures their intrinsic utility over the outcomes, which affects both parties' gain from contracting on the verifiable information. The main result is the ambiguous effect of a mandatory disclosure regulation. While a disclosure mandate can enhance prosocial effort and welfare when the voluntary regime yields non-disclosure, it can reduce welfare when full disclosure emerges voluntarily. In cases where voluntary disclosure is partial, mandating disclosure can either improve or undermine contracting efficiency and welfare, depending on the specification of agent types and the principal’s objective.