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In a continuous-time setting we investigate how the management of a firmcontrols a dynamic choice between two generic voluntary disclosure decisionrules: one with full and transparent disclosure termed $\it{candid}$, theother, termed $\it{sparing}$, under which values only above a dynamic thresholdare disclosed. We show how management are rewarded with a reputational premiumfor candour. The candid strategy is costly because the sparing alternativeshields the firm from potential downgrades following low value disclosures. Weshow how parameters of the model such as news intensity, pay-for-performanceand time-to-mandatory-disclosure determine the optimal choice of candid versussparing strategy and the optimal time for management to switch between the two.The private news updates received by management are modelled with a Poissonprocess, occurring between the fixed mandatory disclosure dates, such as fiscalyears or quarters, with the news received generated by a backgroundBlack-Scholes model of economic activity and of its partial observation. Themodel presented develops a number of insights, based on a very simple ordinarydifferential equation (ODE) characterizing equilibrium in apiecewise-deterministic model, derivable from the background Black-Scholesmodel. It is shown that in equilibrium when news intensity is low a firm mayemploy a candid disclosure strategy throughout, but will otherwise switch(alternate) between periods of being candid and periods of being sparing withthe truth (or the other way about); that is, we are able to characterize whenin equilibrium a candid firm will switch to adopting a sparing strategy. Themodel illustrates how parameters such as time to mandatory disclosure, newsintensity and pay-for-performance may drive such switching behaviour.$\it{With\,constant\,pay\,for\,performance\,parameters,\,at\,most\,one\,switching\,occurs.}$

The Kind of Silence: Managing a Reputation for Voluntary Disclosure in Financial Markets