Information security is a fundamental concern for
corporations operating in today’s digital economy. The number of
firms disclosing items concerning their information security on
reports filed with the U.S. Securities and Exchange Commission (SEC)
has increased in recent years. A question then arises as to whether
or not there is value to the voluntary disclosures concerning
information security. Thus, the primary objective of this paper is
to assess empirically the market value of voluntary disclosures of
items pertaining to information security. Based on a sample of 1,641
disclosing and 19,266 non-disclosing firm-years in
a cross-sectional pooled model, our primary findings provide strong
evidence that voluntarily disclosing items concerning information
security is associated positively with the market value of a firm.
These findings are based on the use of a market-value relevance
model, as well as a bid-ask spread analysis. The study’s findings
are robust to alternative statistical analyses. The findings also
provide support for the signaling argument, which states that
managers disclose information in a manner consistent with increased
firm value. Finally, the study findings provide some insight into
the strategic choice that firms make regarding voluntary disclosures
about information security.
Keywords: Information security, market value, voluntary
disclosures, selection bias, bid-ask spread