Disclosure Timeliness and Jurors’ Liability Assessments: The Impact of Delayed Cybersecurity Disclosures and Management Justifications

• In Event: Technology-Related Litigation Judgments

Abstract

This study examines the impact of disclosure timeliness and the management justifications on jurors' liability assessments. The purpose of this study is to determine how the characteristics and content of cybersecurity incidents' disclosures impact jurors' liability assessments. Specifically, this study explores how jurors react to management forthcomingness (i.e., timeliness) in disclosing the incident and the plausibility of the explanations provided to justify the disclosure strategy (i.e., timing). We predict and find that more timely disclosures lead to more favorable assessments of causal attribution and liability and that assessments of causal attribution mediate the relationship between disclosure timeliness and liability. We also find evidence that the use of plausible (implausible) justifications lead to stronger (weaker) beliefs that the company is to be blamed for the disclosure timing. The evidence suggests that plausible justifications help mitigate the negative effect of delayed disclosure on assessments of causal attribution and liability, but this effect is not consistently observed when a disclosure is made in a timely manner. This study has relevant implications to the accounting literature and theory on disclosure timeliness and the use of remedial tactics to reduce litigation. This study is also relevant in light of the increased incidence of cybersecurity attacks and the associated cost of litigation.

Authors

• Patricia Navarro, University of Nevada-Las Vegas

• Steve G Sutton, Norwegian School of Economics