Cybersecurity Risk

Chris Florackis, Christodoulos Louca, Roni Michaely and Michael Weber

No 28196, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using textual analysis and comparing cybersecurity-risk disclosures of firms that were hacked to others that were not, we propose a novel firm-level measure of cybersecurity risk for all US-listed firms. We then examine whether cybersecurity risk is priced in the cross-section of stock returns. Portfolios of firms with high exposure to cybersecurity risk outperform other firms, on average, by up to 8.3% per year. At the same time, high-exposure firms perform poorly in periods of high cybersecurity risk. Reassuringly, the measure is higher in information-technology industries, correlates with characteristics linked to firms hit by cyberattacks, and predicts future cyberattacks.

JEL-codes: G14 G31 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-ict
Note: AP CF
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Published as Chris Florackis & Christodoulos Louca & Roni Michaely & Michael Weber & Itay Goldstein, 2022. "Cybersecurity Risk," The Review of Financial Studies, vol 36(1), pages 351-407.

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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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