The impact of cybersecurity risk disclosure and governance on firm value and stock return volatility

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Abstract

The research aims to analyze the determinants of cybersecurity risk disclosure (CSRD) in Saudi Arabia and discover the influence of CSRD on both firm value and stock return volatility. The study used a mixed-methods approach that combines qualitative and quantitative techniques to determine the relationships used by the content analysis method to analyze the annual financial reports of Saudi firms for the period from 2015 to 2022, to estimate the volume of CSRD, firm value, and stock return volatility. The results of the study show that the impact of a firm’s size, age, leverage, and profitability are positive and significant on CSRD. In contrast, free cash flow has no significant effect on CSRD. Moreover, a curvilinear relationship exists between operating expenses and CSRD. In addition, Firm value is positively and significantly correlated with CSRD and many firm characteristics. However, stock return volatility is negatively and significantly correlated with CSRD in the Saudi business environment.

Keywords: Cybersecurity, Risk Disclosure, Firm Value, Stock Return Volatility, Saudi Arabia

Authors’ individual contribution: Conceptualization — A.A.A. and M.M.A.; Methodology — M.M.A.; Formal Analysis — A.A.A.; Investigation — M.M.A.; Writing — Original Draft — M.M.A.; Writing — Review & Editing — A.A.A. and M.M.A.; Supervision — A.A.A.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: M0, M1, M4, M40, M41

Received: 26.03.2024
Accepted: 21.01.2025
Published online: 24.01.2025

How to cite this paper: Alsadoun, A. A., & Albaz, M. M. (2025). The impact of cybersecurity risk disclosure and governance on firm value and stock return volatility. Journal of Governance & Regulation, 14(1), 194–205. https://doi.org/10.22495/jgrv14i1art18