Cybersecurity Risk Disclosure, Board Characteristics, and Firm Performance in the Fourth Industrial Revolution Era: Evidence from an Emerging Economy

The fourth industrial revolution has provided an impetus for the corporate sector to improve operational efficiencies, cut costs, and increase profitability. However, this has also resulted in a higher cybersecurity risk, especially during the COVID-19 pandemic. The objective of this study is to investigate the moderating effect of board characteristics on cybersecurity risk disclosures and company performance for South African listed companies. A content analysis of the integrated reports published by listed companies on the Johannesburg Stock Exchange (JSE) is performed to evaluate the extent to which cybersecurity risk is disclosed from 2015 to 2021. Pooled Ordinary Least Square (POLS) with a robust standard error approach and Two Stage Least Square (2SLS) techniques are employed to analyse the moderating effect of board characteristics on cybersecurity risk disclosure and company performance. The study finds that cybersecurity risk disclosure has a negative and adverse effect on return on assets and Tobin’s Q. Meanwhile, the study documents that gender and ethnic diversity serve as strong moderators in mitigating the detrimental effects of cybersecurity risk disclosure on the two measures of firm performance. This outcome is consistent and robust across the different methodologies adopted. Policy makers can benefit from this study with regard to mandatory board requirements, in terms of gender and ethnic composition that can be employed to strengthen the cybersecurity mitigation strategies at the company level to promote organisational performance.