Cybersecurity Risk

Chris Florackis, Christodoulos Louca, Roni Michaely and Michael Weber
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Chris Florackis: University of Liverpool (UK)
Christodoulos Louca: Cyprus University of Technology

No 20-108, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We develop a novel firm-level measure of cybersecurity risk using textual analysis of cybersecurity- risk disclosures in corporate filings. The measure successfully identifies firms extensively discussing cybersecurity risk in their 10-K, displays intuitive relations with quantitative measures of cybersecurity risk disclosure language, exhibits a positive trend over time, is more prevalent among industries relying more on information technology systems, correlates with several characteristics linked to firms hit by cyber attacks and, importantly, predicts future cyber attacks. Stocks with high exposure to cybersecurity risk exhibit high expected returns on average, but they perform poorly in periods of increasing attention to cybersecurity risk.

Keywords: Cyber attacks; Risk Disclosures; Textual Analysis; Stock returns (search for similar items in EconPapers)
JEL-codes: G14 G32 (search for similar items in EconPapers)
Pages: 72 pages
Date: 2020-11
New Economics Papers: this item is included in nep-ict and nep-rmg
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https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3725130 (application/pdf)

Related works:
Journal Article: Cybersecurity Risk (2023)
Working Paper: Cybersecurity Risk (2020)
Working Paper: Cybersecurity Risk (2020)
Working Paper: Cybersecurity Risk (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp20108

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