Cybersecurity breaches and investors’ interest in the firm as an investment

Kristina C. Demek and Steven E. Kaplan

International Journal of Accounting Information Systems, 2023, vol. 49, issue C

Abstract: Cybersecurity breaches pose a significant risk to firms. To combat these risks, many firms engage in strategic cybersecurity risk management initiatives. While these efforts may reduce the likelihood of a cybersecurity breach, they do not eliminate the risk of a breach. In the event of a cybersecurity breach, firms may issue an apology to investors. This study uses an experiment to examine whether a firm indicates cybersecurity risk management is a strategic initiative and whether a post-cybersecurity breach apology by the CEO impacts nonprofessional investors’ investment interest in the firm. Results show that, in response to a cybersecurity breach, the presence of a CEO apology positively impacts investors’ investment impression and their perceptions of CEO affective and CEO cognitive trust. We find that investors’ investment interest is lowest for a firm that previously indicates cybersecurity risk management is a strategic initiative and where the CEO does not issue an apology. The CEO apology, however, does not significantly impact investment amount, a secondary measure of investor interest. Results from this study have implications for managers, investors, and regulators.

Keywords: Cybersecurity risk management; Apology; Non-professional investors; Data breach; CEO affective trust; CEO cognitive trust (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ijoais:v:49:y:2023:i:c:s1467089523000088

DOI: 10.1016/j.accinf.2023.100616

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