Cybersecurity risk and bank risk-taking

Zunaidah Sulong, Md. Habibur Rahman Fuszder, Mohammad Abdullah and Emmanuel Abakah

Journal of Behavioral and Experimental Finance, 2025, vol. 47, issue C

Abstract: This paper investigates the influence of cybersecurity risk on banks’ risk-taking behavior. Utilizing data from U.S. banks spanning 1998–2018, we find that heightened cybersecurity risk is associated with increased risk-taking by banks. These findings remain robust across various alternative proxies and persist even after addressing endogeneity issues. Further analysis indicates that this positive relationship is more pronounced among banks facing greater competitive pressure, higher IT investment, increased deposit withdrawals, and more negative disclosure sentiment. Conversely, the relationship is attenuated in banks with substantial goodwill and a more positive disclosure tone. Sub-sample analyses show that the effect is particularly strong for smaller banks and those with elevated financial vulnerability. These findings have important implications for the digital transformation of the banking sector.

Keywords: Cybersecurity risk; Bank risk-taking; Goodwill; Bank competition; Bank run (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:47:y:2025:i:c:s2214635025000619

DOI: 10.1016/j.jbef.2025.101080

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