Cybersecurity Transparency and Firm Success: Insights From the Australian Landscape

Abstract

Amid the increasing prevalence of cybersecurity challenges on a global scale, the significance of disseminating details pertaining to a company's ability to counteract cybersecurity threats becomes evident, reflecting the vigilance and preparedness of the organization in addressing such risks. This study aims to investigate the correlation between the disclosure of cybersecurity practices and the performance of companies within the Australian S&P/ASX 300 index spanning the period from 2010 to 2020. To analyze this connection, the generalized method of moments (GMM) technique was employed on the panel dataset of 2376 observations to address potential endogeneity issues identified in the initial findings. Our results indicate a positive impact on both accounting and market-based performance metrics due to increased corporate cybersecurity disclosure. Consequently, broadening the range of disclosed cyber-related information enhances companies' performance by furnishing valuable insights to stakeholders. The findings underscore the significance and reach of cybersecurity disclosure, affirming that meeting stakeholder expectations through the divulgence of cybersecurity information yields financial advantages and increases company performance. Furthermore, heightened transparency in cybersecurity matters mitigates information asymmetry, curtails agency problems, and reduces associated costs. Consequently, the disclosure of cybersecurity practices and incidents emerges as a strategic avenue for companies to bolster corporate well-being in the future, fostering transparency, building trust with stakeholders, and potentially augmenting revenue. In light of these findings, it is increasingly imperative for companies to prioritize cybersecurity and proactively disclose their cybersecurity practices and incidents. To the best of our knowledge, this study stands out as one of the limited inquiries examining the impact of cybersecurity disclosure on company performance, specifically within the Australian context. The insights derived from this research carry significance for regulators, policymakers, investors, lenders, and a diverse array of stakeholders. By shedding light on the crucial role of cybersecurity disclosure practices, this study offers valuable guidance for these entities in understanding the pivotal connection between such disclosures and a company's ability to attain its financial objectives.