M&A and Cybersecurity Risk: Empirical Evidence

Gabriele Lattanzio and Jerome Taillard
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Gabriele Lattanzio: Nazarbayev University, Graduate School of Business
Jerome Taillard: Babson College, Department of Finance

No 2021/02, Working Papers from Nazarbayev University, Graduate School of Business

Abstract: Using text-based measures of cybersecurity risk, we document that low cybersecurity risk firms are more likely to initiate or be targeted for an M&A transaction. Further, we show that the market has recently started to price cybersecurity risk at the time of a deal announcement and – consistent with this finding - attempted mergers are significantly less likely to fail if the selected target has a low cybersecurity risk profile. Cyber risk is finally reflected in merger premium, which appears to be systematically higher for mergers where the acquirer exhibits low cybersecurity risk levels. These findings offer novel evidence on the economic impact of cybersecurity risk on the market for corporate control.

Keywords: Mergers and Acquisitions; Cybersecurity Risk; M&A Withdrawal; Valuation (search for similar items in EconPapers)
JEL-codes: G30 G34 M14 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2021-10
New Economics Papers: this item is included in nep-cfn, nep-com, nep-ind and nep-rmg
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