Disclosure under Noisy Information Processing

We study voluntary disclosure when investors observe firm reports through noisy information intermediaries such as auditors, analysts, rating agencies, or data providers. Any processing noise overturns the standard prediction of a unique partial-disclosure equilibrium. With low disclosure costs, the model unravels to full disclosure despite positive costs. With higher costs, the game admits two threshold equilibria featuring different disclosure probabilities. We characterize how the cost threshold for unraveling and the equilibrium set respond to changes in noise and fundamental uncertainty. In settings with high disclosure, both uncertainty and processing noise reduce disclosure, while higher certification costs can counterintuitively increase it. Endogenizing disclosure costs as optimal fees shows how profit-maximizing intermediaries select among equilibria, potentially generating a high-fee, high-disclosure regime. Extensions with bounded support, uncertain information endowment, endogenous noise, and competing information sources apply the insights to general information environments. The results caution against interpreting greater frictions as necessarily reducing disclosure.