Learning, Investment, and the Optimal Frequency of Mandatory Disclosure

We develop a dynamic theory of mandatory disclosure frequency. The manager seeks to maximize future stock prices and collects information privately about the firm fundamentals. Information acquisition increases the arrival rate of private information signals, but it is costly. The manager can choose to make public disclosures about his private information or withhold it until the mandatory announcement date. We consider the impact of the information acquisition and disclosure activities on the firm's endogenous investments. Furthermore, we analyze the optimal mandatory disclosure frequency from the perspective of a regulator aiming to maximize firm value. The optimal mandatory disclosure frequency is non-monotonic in firm profitability; mandatory disclosure is more frequent when the firm profitability is either very low or very high. More frequent mandatory disclosures may crowd out voluntary disclosures, exacerbate moral hazard issues, and lead to lower investments.