Corporate Value at Risk: Why We Should Care About Climate (IFRS S2) and Cybersecurity Risks?

2.1 Cybersecurity risk disclosure and firm value

According to the American Institute of Certified Public Accountants (AICPA, 2018), "Cyber security is one of the most important issues facing management and board members in almost all companies-large or small, public or private." Despite government requirements, for qualitative details about cyber security risk without the requirement of probability or impact estimates, companies are still responsible for the content and quality of their disclosures [16].

Several studies have indicated the relationship between cyber risk disclosure and improved transparency and accounting information quality. For instance, Elnagar et al. [1] found that voluntary disclosure of cybersecurity risk significantly increases the quality of both financial reporting and is positively associated with market value. Furthermore, previous studies [17, 18] mentioned that firms which have a high reputation tend to provide broader disclosures in this area that targeting to protect personal data, avoid potential financial losses, and legal punishment.

Similarly, Matemane et al. [19] investigated how the management board moderate the relationship between CyRD and firm performance in South Africa, and concluded that cyber risk may adversely affect performance under certain conditions, like governance level and organizational control. A study by Ghose et al. [20] showed that voluntary reporting on cybersecurity risk strengthens the reputation of a company in the financial markets and investors’ trust. The same concept was found by Arora et al. [21] in emerging markets like India.

A study by Chen et al. [6] indicated that market reactions and investors are highly negative when companies reduce the disclosures of cybersecurity risk and reporting transparency. Also, Berkman et al. [22] stated that the cultivation of cybersecurity reduces regulatory pressure and experienced risks, thus increasing the company's value.

In the same vein, Kosutic and Pigni [23] developed an ideological model, which links cybersecurity skills to long-term competitive benefits. Conversely, Florackis et al. [24] showed that companies facing high cybersecurity risk often experience poor performance. Start-ups and small companies may especially lack resources to effectively handle these risks [25]. Although advanced cybersecurity measures improve the prevention of incidents, some studies argue that they may not necessarily correlate with better profitability [26]. For example, Chen et al. [6] pointed out that some disclosures are too general and unhelpful, and may be viewed as an attempt to avoid liability rather than transparency.

This variation in results suggests that the impact of cyber risk disclosure is not linear and may be influenced by the governance context, level of institutional development, and regulatory oversight. Hence, the first hypothesis can be stated as follows;

H1: There is a positive impact of cybersecurity risk disclosure on firm value.

2.2 Climate risk disclosure and firm value

In light of global interest in sustainability, the visibility of disclosure of climate risk can be evaluated by firms’ ability to meet the increasing stakeholders and the ability to create long-term value [27]. Transparent climate-related CRD helps identify climate-related risks and opportunities, improves the company's reputation, and contributes to long-term stability [28]. However, Arian and Sands [29] and Vestrelli et al. [9] stated that many companies still do not quite recognize the environmental implications of climate risk. In other words, transparency in climate disclosure is linked to companies' ability to innovate environmentally [20, 30] found that managers consider climate risk as a material risk for operating activities, and companies at high CRD levels are at a lower risk of experiencing a decline in share value and have better investor communication [31].

In addition, increasing the risk of climate risk often leads to unfavorable market reactions [32]. A study in the Sri Lankan context has shown that FV is positively influenced by an increase in climate-related disclosures, especially in the event of clear organizational or societal pressure [33]. Therefore, CRDs have been shown to promote green innovation, especially for FIRMS that are facing ethical obligations [11, 34]. To provide a deeper understanding of the relationship between non-financial disclosure and corporate value in disparate regulatory and economic environments in the emerging Asian context, the second hypothesis can hence be formulated as follows;

H2: There is a positive impact of climate risk disclosure on firm value.

4.1 Descriptive analysis

Table 3 presents descriptive data for all research variables. Analysis includes mean, median, standard deviations, skewness and kurtosis. The results suggest that the variables are normally distributed, which justifies the use of parametric statistical methods.

Table 3 indicates that the mean for Cybersecurity risk disclosure (CyRD) is 0.201, with a median of 0.181 and a standard deviation of 0.106. These figures refer to moderate variation in CyRD levels in the sample. Furthermore, the table also explains that the mean for CRD is 0.304, with a median of 0.264 and a standard deviation of 0.118. From the four CRD dimensions, the average scores are as follows: CRM (0.310), CRG (0.304), SCC (0.302) and MO (0.300). This indicates that climate risk management (CRM) is the most prominent revealed dimension, highlighting its centrality in corporate environmental risk strategies.

The table shows that firm value was measured using three indicators. The highest average score was for Tobin's Q (0.327), followed by EPS (0.313) and PBV (0.301). This suggests that Tobin's Q is the most representative measure to capture the long-term company when it comes to disclosing cybersecurity and climate risk. Table 4, moreover, shows the descriptive analysis of companies by industry.

Table 3. Descriptive analysis of research variables

Table 4. Descriptive analysis of companies by industry

4.2 Correlation analysis

Table 5 shows Pearson's correlation matrix between all variables used in the model, which shows that most relationships are statistically significant at the 1% or 5% level, with no serious concerns about linear multicollinearity between independent variables, which enhances the validity of subsequent regression models. The results show that CyRD correlates positively and strongly with firm value when measured by Tobin's Q (r=0.777) and earnings per share (EPS) (r=0.754), while there is no significant relationship with the price-to-book value (PBV) measure. The magnitude of the correlation (0.777) indicates a significant economic impact. It can be said that companies that demonstrate higher levels of disclosure tend to have higher market valuations, reflecting enhanced investor confidence and reduced perceived risk. This result is consistent with previous studies [1, 21, 41]. Climate risk disclosure (CRD), furthermore, shows a stronger correlation with firm value, particularly with EPS (r=0.982) and Tobin's Q (r=0.848), indicating that transparency in environmental disclosure is a key strategic factor for increasing firms' competitiveness and attracting investors, especially for firms facing financing or regulatory challenges. This effect is not just statistically significant, but reflects an economic impact that can influence management performance and investment decisions. This result is consistent with the studies conducted by previous studies [9, 33, 11]. In addition, relationships between control variables show strong correlations with both CyRD and CRD, meaning that these factors may play an intermediate or modifying role in the relationship between disclosure and company value. This requires taking them into account in regression models to avoid bias in estimates [1].

Table 5. Pearson correlation matrix

Note: *: Correlation is significant at the 0.05 level (2-tailed), **: at the 0.01 level (2-tailed)

4.3 Hypothesis testing

Regression analysis is used to predict relationships between the dependent variable (FV) with the independent variables (CRD, CRD) for the purpose of testing the main hypotheses (H1, H2). Several steps have been taken to reduce the potential for internal variation and bias through:

• Inclusion of key control variables LEV, SIZE, PROF that represent the most prominent factors that may affect a company's value, reducing the problem of missing variables.

• Examination of linear Multicollinearity using values (VIF) for all models, which were low (≤1,000), confirming the stability of the estimates.

• Correlation analysis (Table 5) to check that there are no very strong correlations between independent variables, which enhances the validity of the model.

Furthermore, the primary objective of the study is to explore the directional relationship, not the causal estimation, so the use of OLS is appropriate at this stage for hypothesis testing.

H1: There is a positive impact of disclosing cybersecurity risks on the firm value.

This hypothesis emerges the testing of three sub-hypotheses divided according to the selected measures of company value (Topin's Q, PBV, EPS). Table 6 shows the results of the regression model used to measure the impact of cybersecurity risk disclosure (CyRD) on a company's value according to a scale (Tobin's Q) shows that the coefficient value of the independent variable (CyRD) was 0.823, which is statistically positive at a significance level of less than 5% (t=3.413, p=0.003). This indicates a strong positive relationship between the degree of cybersecurity risk disclosure and the value of the company, which supports the sub-hypothesis (H1.a).

In practice, this large coefficient size indicates that a single increase in the level of cybersecurity risk disclosure translates into a significant increase in Tobin's Q of 0.823, a ratio that is economically significant, especially in sectors that rely on market confidence and institutional reputation. Thus, these results not only imply a moral impact but also underscore the economic importance of disclosure as a tool to enhance investor confidence and reduce the perception of future risks. The model results also show that R² value was 0.604, which means that cybersecurity risk disclosure, taking into account the control variables LEV, SIZE, PROF, explains about 60% of the change in a company's value, which is a relatively high level of interpretation.

Table 6. The impact of CyRD on firm value based on TQ

Table 7. The impact of CyRD on firm value based on PBV

The control variables also showed significant effects, enhancing the reliability of the model and indicating that the relationship between CyRD and TQ is influenced by internal factors such as financial leverage, company size, and profitability. Based on the above, it can be said that the results not only support the hypothesis statistically but also demonstrate a clear economic impact that makes cybersecurity risk disclosure a strategic tool for raising a company's value.

Moving on to Table 7, the results of the regression model that tests the effect of CyRD on the FV when measured by the price-to-book value index (PBV), the findings show that the value of the coefficient (0.429) is positive but statistically insignificant (p=0.381), and the F test indicates that the model as a whole is not stable (F=0.840, p>0.05), which means that disclosing these risks does not adequately explain changes in a company's value according to this measure. Accordingly, the sub-hypothesis (H1.b) is rejected.

However, the magnitude of the coefficient (0.429) must be viewed from a practical perspective. Although not statistically significant, this initial positive trend may reflect that cyber risk disclosure can contribute to enhancing market confidence in the long term. However, its impact on the PBV measure may be limited by the nature of this indicator, which is influenced by accounting factors rather than being a direct reflection of investor perceptions.

The results also indicate that control variables (LEV, SIZE, PROF) had a relatively significant impact, highlighting that PBV assessments are influenced more by internal structural factors than voluntary risk disclosure. This suggests that cyber risk disclosure may not be a major factor in book pricing decisions, but it may be more important in other metrics like Tobin's Q or EPS that directly reflect market trends.

Table 8 shows the regression model results that measure the impact of CyRD on the firm's value according to the EPS index. The results showed that the coefficient for CyRD was 0.892, which is a positive and statistically significant (t=3.631, p=0.005), and the R² value was 0.569. This means that cybersecurity risk disclosure, with the inclusion of the control variables, explains about 57% of the variance in firm value. This indicates good explanatory power of the model.

Table 8. The impact of CyRD on firm value (EPS)

From an impact size perspective, the coefficient (0.892) is relatively large, indicating that an increased level of CyRD is coupled with a substantial increase in EPS, which reflects an important economic impact. For investors' decisions, this finding suggests that disclosure is a strategic tool for improving confidence in future financial performance and reducing the risk of uncertainty.

The control variables also showed high coefficients and strong semantics, indicating that EPS is influenced by internal factors besides disclosure. However, the clear positive impact of (CyRD) indicates that transparency in cyber risks is considered one of the tools that contribute to raising the market value of companies by improving financial expectations and attracting investors. Accordingly, the sub-hypothesis (H1.c) can be accepted, noting that the magnitude of this impact justifies the adoption of broader disclosure policies in governance and risk management strategies.

Based on the results of Tables 6-8, the first main hypothesis (H1) can be confirmed and accepted, which states that there is a positive and significant impact of CyRD on an FV. This finding suggests that cyber risk disclosure is not just a regulatory obligation, but rather a strategic tool that enhances investor and market confidence by reducing uncertainty associated with cyber threats and providing a more transparent picture of a company's ability to manage risk.

This finding is consistent with previous studies [5, 17, 21, 41], which demonstrated that disclosure enhances market value by improving corporate reputation and attracting investments. Although it contradicts a study [26] that found no significant effect, the results of this study confirm that the magnitude of the effect (Coefficient=0.892) indicates that an increase in disclosure may translate into a significant improvement in corporate value, an effect with clear economic significance.

According to signaling theory, cyber risk disclosure is a way to send positive signals to markets about a company's quality and credibility [42]. Thus, companies that demonstrate high transparency in this area are perceived as more prepared to face future risks, which reduces perceived risks and increases their investment attractiveness [43, 44]. Therefore, these results highlight the importance of disclosure not only for achieving statistical significance, but also for achieving practical economic value that increases the company's competitiveness in the markets.

H2: There is a positive and significant impact of climate risk disclosure on firm value.

Table 9 shows the results of a regression model that measures the impact of climate risk disclosure (CRD) with its four sub-indices, GCC, SCM, MRC, and MG on a company's value according to Tobin's Q index. The results showed that the coefficient value for (CRD) was 0.809, which is a positive and highly significant coefficient (t=5.063, p<0.01). The R² value was 0.719, which means that CRD, with the introduction of the control variables explains about 72% of the change in the company's value, which is a high level of interpretation that highlights the strength of the model. In terms of effect Size, the coefficient (0.809) indicates that an increased level of climate risk disclosure is associated with a significant improvement in firms' valuation in markets (Tobin's Q), an impact that can not only be considered statistically significant, but also shows strategic value, especially for companies operating in regulatory environments and markets with a growing interest in environmental sustainability.

Table 9. The impact of climate risk disclosure on firm value based on TQ

All four disclosure indicators GCC, SCM, MRC, and MG revealed positive coefficients and significant connotations, reflecting that each dimension clearly contributes to improving the company's value. In contrast, control variables demonstrated a significant impact, indicating that the relationship between disclosure and value is influenced by internal structural factors. According to signal theory, climate risk disclosure sends positive signals to investors about a company's seriousness in managing long-term risks and the sustainability of its business, which enhances market confidence and raises its valuation.

Accordingly, the sub-hypothesis (H2.a) which states that climate risk disclosure has a significant and positive impact on a company's value according to Tobin's Q index can be accepted. These findings indicate that environmental disclosure is not just an obligation, but rather represents a strategic tool to enhance institutional legitimacy, attract capital, and increase competitiveness in markets.

Table 10 presents the results of a regression model that tests the impact of climate risk disclosure (CRD) on a firm's value according to the Price to Book Value Index (PBV). The results showed that the coefficient (CRD) was 0.846, which is positive and statistically significant (t=2.430, p<0.05). The R² value was also 0.371, meaning that climate risk disclosure, with the inclusion of the control variables explains about 37% of the variance in the company's value. Although the explanatory power is lower than the Tobin's Q index results in Table 9, the result is still statistically and economically significant.

Table 10. The impact of climate risk disclosure on firm value based on PBV

From an effect size, the coefficient (0.846) indicates that an increased level of climate risk disclosure is associated with a significant improvement in a company's value when measured in PBV, an effect that cannot be considered merely statistically significant, but rather shows practical value for companies in enhancing investor confidence and raising their book valuations. Disclosure of climate risks is a signal to markets and investors that the company is aware of environmental risks and has clear strategies to manage them. This signal thus reduces investor uncertainty and enhances a company's credibility, improving its valuations even on accounting-based metrics such as PBV.

All four disclosure indicators GCC, SCM, MRC, and MG showed positive and significant coefficients, reflecting that each dimension of disclosure adds real value. In addition, control variables showed a significant effect, suggesting that PBV valuations are influenced by a combination of disclosure and structural factors.

Based on these results, the sub-hypothesis (H2.b), which states that climate risk disclosure has a significant and positive impact on a company's value according to the PBV index can be accepted. This result hence confirms that environmental disclosure not only serves regulatory compliance, but is a strategic tool for building market confidence and enhancing a company's value.

Table 11. The impact of climate risk disclosure on firm value based on EPS

Table 11 presents the results of a regression model that tests the impact of Climate Risk Disclosure (CRD) on a firm's value according to the Earnings Per Share Index (EPS). The table's results showed that the coefficient for (CRD) was 1.047, which is a positive and strongly statistically significant coefficient (t=16.620, p<0.01). The R² value also showed a very high value of 0.965, which means that climate risk disclosure explains 96% of the change in EPS. This result reflects the exceptional explanatory power of the model.

From an effect size perspective, the coefficient value (1.047) shows that increased climate risk disclosure is coupled with a significant improvement in corporate profitability per share, indicating a tangible economic impact. This result not only demonstrates statistical significance, but also argues that climate risk disclosure is a strategic lever that can make a significant difference in market assessments. Furthermore, disclosure of climate risks sends clear signals to markets and investors that the company is adopting proactive strategies to manage long-term risks. This signal boosts investor confidence and reduces uncertainty, which leads to higher financial valuations.

When looking at the four dimensions of disclosure GCC, SCM, MRC, and MG, we find that they all showed positive and significant coefficients, indicating that the impact is not limited to just one dimension, but rather an integrated cumulative impact that supports the company's position in the markets. In addition, control variables have proven their role in influencing EPS, suggesting that the relationship between disclosure and value is influenced by a combination of internal and external factors.

Based on these results, the sub-hypothesis (H2.c) can be accepted, which confirms the positive and moral impact of climate risk disclosure on a company's value according to the EPS index. Hence, the results show that disclosure not only achieves regulatory compliance, but is also a strategic element that enhances institutional legitimacy, reassures investors, and contributes to creating a strong competitive advantage.

Based on the results of Tables 9-11, the second main hypothesis (H2) can be confirmed and accepted, which states that climate risk disclosure positively affects a company's value. Analyses' findings showed that disclosure across its four dimensions GCC, SCM, MRC, MG explains a significant proportion of the variance in Tobin's Q, PBV, EPS value indices, with explanatory power reaching 96% of changes in EPS (R²=0.965), with high impact coefficients exceeding 1.0 in some indices, suggesting that climate risk disclosure represents a fundamental economic and strategic factor rather than just a regulatory obligation.

• According to signal theory [42], climate risk disclosure sends positive signals to markets that a company is adopting proactive environmental risk management strategies, which reduces investor uncertainty and enhances their confidence in the sustainability of financial performance, which is reflected in improved value indicators such as EPS and Tobin's Q.

• Legitimacy theory [45, 46] shows that climate risk disclosure helps companies enhance their social and regulatory legitimacy by demonstrating their commitment to sustainability practices and good governance, which reduces legal and regulatory risks and improves their corporate reputation, which increases their attractiveness to investors [47, 48].

The analysis also shows that the four dimensions of disclosure GCC, SCM, MRC, and MG all contribute in an integrated and cumulative manner to raising the company's value; The positive coefficients and statistical connotations of each indicator reflect that the impact is not limited to a specific aspect (such as climate management or risk governance), but rather expresses a comprehensive strategic approach that enhances the company's competitiveness and reduces financial risks resulting from climate change [49].

Thus, these findings confirm that climate risk disclosure is not simply a regulatory requirement or a response to stakeholder demands [9, 11, 33], but rather a strategic tool with a dual impact: on the one hand, it sends signals of confidence to markets, and on the other hand, it gives the company social and regulatory legitimacy, which supports the stability of its market value and enhances the long-term sustainability of its performance.