School of Business

Classifying the contents of cybersecurity risk disclosure through textual analysis and factor analysis

Document Type

Article

Abstract

Cybersecurity has garnered much attention due to the increasing frequency and cost of cybersecurity incidents and has become a significant concern for organizations and governments. Regulators such as the Securities and Exchange Commission (SEC) have also shown an interest in cybersecurity and the quality of cybersecurity risk disclosures. This paper examines the informativeness of cybersecurity risk disclosures when cybersecurity incidents or related internal control weaknesses are reported. In particular, we propose a quantitative methodology, which is a combination of textual analysis and factor analysis, for classifying cybersecurity risk disclosures into nine factors. Our results show different disclosing patterns among firms depending on whether they had cybersecurity incidents and internal control weaknesses. Further, our analysis indicates that firms disclose control-related factors to mediate the negative effect of disclosing vulnerability-related factors. This study provides various stakeholders, including investors, regulators, and researchers, with insight into the informativeness of cybersecurity risk disclosures.

Publication Title

Journal of Information Systems

Publication Date

2021

Volume

35

Issue

2

First Page

179

Last Page

194

ISSN

0888-7985

DOI

10.2308/ISYS-2020-031

Keywords

cybersecurity, factor analysis, risk factor disclosure, textual analysis

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