The Impact of Country Institutional Factors on Firm Disclosure: Cybersecurity Disclosures in Chinese Cross-Listed Firms

37 Pages Posted: 4 Sep 2021 Last revised: 6 Jul 2022

See all articles by Thomas Barry

Thomas Barry

Columbia University - Columbia Business School

Jonathan Jona

University of New Mexico - Robert O. Anderson Schools of Management

Naomi S. Soderstrom

University of Melbourne

Date Written: July 6, 2022

Abstract

This paper explores differences in qualitative disclosures between Chinese firms that cross-list in the US and their US domestic counterparts that reflect firm-level cybersecurity awareness. Consistent with the strong regulatory framework in China externalizing cybersecurity and thus reducing the need to disclose individual company cybersecurity awareness, we find that relative to their US domestic counterparts, Chinese cross-listed firms in the US provide less cybersecurity disclosure. However, market valuation of these cybersecurity disclosures is higher for Chinese cross-listed firms, suggesting that the market more favorably views Chinese firm disclosures that communicate a greater level of internalized cybersecurity awareness. We also explore the effect of institutional setting on market valuation of cybersecurity awareness through an event study surrounding the arrest of Huawei’s CFO. This event highlighted cybersecurity weaknesses at Huawei, potentially more generally challenging the effectiveness of Chinese cybersecurity policies. We find a negative stock market reaction to the event, but only for our Chinese sample. These results provide evidence that the market’s view of company cybersecurity awareness is sensitive to changes in perceptions of companies’ institutional setting.

Keywords: Cybersecurity awareness, Disclosure, Market valuations, Cross-listing, China

JEL Classification: M41

Suggested Citation

Barry, Thomas and Jona, Jonathan and Soderstrom, Naomi S., The Impact of Country Institutional Factors on Firm Disclosure: Cybersecurity Disclosures in Chinese Cross-Listed Firms (July 6, 2022). Journal of Accounting and Public Policy, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3916525 or http://dx.doi.org/10.2139/ssrn.3916525

Thomas Barry

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Jonathan Jona (Contact Author)

University of New Mexico - Robert O. Anderson Schools of Management ( email )

Albuquerque, NM 87131
United States

Naomi S. Soderstrom

University of Melbourne ( email )

Victoria
Melbourne, 3010
Australia

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
259
Abstract Views
923
Rank
243,432
PlumX Metrics