A Comparative Analysis of Cybersecurity Risk Disclosures: Startup vs. Traditional Companies
Yuou He
Co-Presenters: Xinyuan Lin, Yixiang Gao
College: College of Business and Public Management
Major: Accounting
Faculty Research Mentor: Xi Jiang
Abstract:
Title: A Comparative Analysis of Cybersecurity Risk Disclosures: Startup vs. Traditional CompaniesAuthors: Yuou He, Xinyuan Lin, Yixiang Gao, Department of Accounting, Kean UniversityAbstract:With the growing reliance on digital infrastructure, cybersecurity risk disclosures have become a critical aspect of corporate transparency and investor confidence. This study examines the differences in cybersecurity risk disclosures between startup companies and traditional firms, focusing on variations in length, specificity, tone, readability, and complexity.Utilizing a sample of publicly available financial reports from both startup and traditional companies, we employ content analysis techniques and text-mining algorithms to identify and categorize key disclosure patterns. Using a dataset of 30 startup technology companies and 30 traditional companies, we identify key variations in cybersecurity disclosure practices. Metrics such as word count, readability indices, and sentiment analysis are applied to distinguish structural and linguistic differences across the two categories.Preliminary findings reveal that startups tend to provide shorter but more specific cybersecurity disclosures, often adopting a proactive and innovative tone to attract potential investors. In contrast, traditional companies generally present longer, more comprehensive disclosures with a conservative tone. Additionally, startup disclosures exhibit higher readability levels, suggesting a strategic effort to communicate complex cybersecurity risks to a broader, less technical audience.These insights contribute to the accounting literature by highlighting the evolving nature of cybersecurity risk disclosures across different organizational contexts. The findings offer practical implications for regulators, auditors, and corporate stakeholders aiming to improve the clarity and effectiveness of cybersecurity disclosures. Future research may further investigate the impact of these disclosure patterns on market perceptions and firm performance.Keywords: Cybersecurity Risk Disclosures, Startup Companies, Traditional Companies, Content Analysis, Financial Reporting