SEC Cybersecurity Guidelines: Insights into the Utility of Risk Factor Disclosures for Investors

29 Pages Posted: 7 Jan 2016

See all articles by Edward A. Morse

Edward A. Morse

Creighton University - School of Law

Vasant Raval

Creighton University College of Business

John R. Wingender

Creighton University

Multiple version iconThere are 2 versions of this paper

Date Written: December 29, 2015

Abstract

In October 2011, the SEC issued new guidelines for disclosure of cybersecurity risks. Some firms responded to these guidelines by issuing new risk factor disclosures. This paper examines the guidelines and cybersecurity disclosures in the context of existing laws governing securities regulation. It then examines empirical results from firm disclosures following the new guidelines. Evidence shows a relatively small proportion of firms chose to modify their risk factor disclosures, with most firms choosing not to disclose any specific cybersecurity risk. Moreover, disclosing firms generally experienced significant negative stock market price effects on account of new disclosures. Rather than viewing disclosure a positive signal of management attentiveness, investors apparently viewed it as a cautionary sign.

Keywords: cybersecurity, data security, securities regulation

JEL Classification: D81, G14, G18, G38, K22

Suggested Citation

Morse, Edward A. and Raval, Vasant and Wingender, John R., SEC Cybersecurity Guidelines: Insights into the Utility of Risk Factor Disclosures for Investors (December 29, 2015). Available at SSRN: https://ssrn.com/abstract=2711439 or http://dx.doi.org/10.2139/ssrn.2711439

Edward A. Morse (Contact Author)

Creighton University - School of Law ( email )

2500 California Plaza
Omaha, NE 68178
United States

Vasant Raval

Creighton University College of Business ( email )

2500 California Plaza
Omaha, NE 68178
United States
402-280-5518 (Phone)
402-280-5565 (Fax)

John R. Wingender

Creighton University ( email )

2500 California Plaza
Omaha, NE 68178
United States

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