 Do Lenders Price Firms’ Cybersecurity Risks?Bokmin Choi, Hans Degryse and Kristien Smedts No 20335, CEPR Discussion Papers from Centre for Economic Policy Research Abstract: Firms are increasingly exposed to cybersecurity risks. Using syndicated loan data covering US firms, we examine how lenders price firms’ ex-ante cybersecurity risks. Our findings indicate that lenders on average charge a 4 to 13 basis points higher loan rate when a firm exhibits greater cybersecurity risks over time. Furthermore, we document that the pricing of cybersecurity risks differs between lender types, as well as within the same lender type depending on their level of awareness of the risks. Commercial banks tend to adopt a more stringent approach to pricing cybersecurity risks compared to non-bank lenders. They also impose more financial covenants and monitor more intensively as firms become riskier. Even within commercial banks, the pricing of cybersecurity risks is primarily driven by lenders who recognize their own cybersecurity risks and have discussed internal risk management policies. These findings highlight the importance of lender awareness on the pricing of unconventional risks. Lastly, the purchase of cybersecurity insurance does not mitigate higher loan spreads. Keywords: Insurance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:20335 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK. |
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