This paper assesses the effects of mandatory disclosure and managerial incentives on a firm’s investment. Mandatory disclosure increases a manager’s incentive to forego profitable projects if the manager incurs private costs to disclose information required for implementing the project. We then examine how shareholders attenuate the underinvestment problem by granting the manager’s private benefits of control. Our analysis shows that shareholders ultimately benefit from the manager’s private benefits when the underinvestment problem is severe. Moreover, we find that shareholders have more incentive to allow the manager’s private benefits when the level of disclosure costs is higher, and the manager’s ownership is lower.