Cyber attacks, discretionary loan loss provisions, and banks’ earnings management

Justin Jin, Na Li, Suyi Liu and S.M. Khalid Nainar

Finance Research Letters, 2023, vol. 54, issue C

Abstract: Cyber threats to banks can indicate high operational risks and a weak internal control system. Our paper is the first to study the impact of banks’ discretionary loan loss provisions on cyber attacks. We investigate whether discretionary loan loss provision of banks can predict a cyber attack and whether banks conduct less or more earnings management following a cyber attack. We find that discretionary loan loss provisions are positively associated with future cyber attacks. We also find that banks will engage in less earnings management following such incidents. We establish the close link between banks’ earnings management and cyber attacks.

Keywords: Cyber attacks; Banks; Earnings management; Discretionary loan loss provisions (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:54:y:2023:i:c:s154461232300079x

DOI: 10.1016/j.frl.2023.103705

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