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Dynamic Disclosure with Uncertain Disclosure Costs ∗

This paper extends the canonical single-period model of voluntary costly disclosure to a dynamic setting with asymmetric information over disclosure costs. I show that dynamic incentives have an ambiguous effect on firms’ disclosure decision and that the cost of disclosure no longer prevents full disclosure by all firms. My main results show that (1) there is a positive inter-temporal connection between disclosure at different periods, (2) dynamic incentives increase the firms’ level of disclosure if and only if the expected cost of disclosure is below a critical threshold and (3) when the expected cost of disclosure is low enough, dynamic incentives lead firms to use a strategy of full disclosure.