Work

Impact of Cybersecurity Disclosure Frequency on Stock Price Crash Risk

Year: 2024

Type: article

Abstract: ABSTRACT By exploring the relationship between stock price crash risk and the frequency of cybersecurity disclosures in financial reports, we present evidence that cybersecurity disclosure does matter because its frequency increases stock price crash risk. We analyze the association between cybersecurity disclosure and stock price crash risk from the perspective of two different theoretical lenses: information asymmetry and investor sentiment. We perform textual analysis on the Chinese A‐shares public companies’ cybersecurity disclosure in financial reports during 2017–2022. We find that the more cybersecurity disclosures in financial reports, the higher the stock price crash risk. Further findings reveal that the effect of the frequency of cybersecurity disclosure on stock price crash risk is more significant in non‐Big‐4 audit companies and companies with lower analyst coverage. These findings imply that the market presents the clear idea that cybersecurity disclosure's negative impact to stock price crashes would be greater than the positive impact under the current settings of the volunteer disclosure policies.

Source: Journal of Corporate Accounting & Finance

DOI: 10.1002/jcaf.22775

Authors: Huaping Wu, Ming Ma, Jidong Zhang

Institutions: Chongqing University of Technology, Minnesota State University, Mankato

Language: English

Topic: Auditing, Earnings Management, Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: bronze

Funder: National Office for Philosophy and Social Sciences

Award: G1107511260