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M&A and Cybersecurity Risk: Empirical Evidence

Author

Listed:
  • Gabriele Lattanzio

    (Nazarbayev University, Graduate School of Business)

  • Jerome Taillard

    (Babson College, Department of Finance)

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.

Suggested Citation

  • Gabriele Lattanzio & Jerome Taillard, 2021. "M&A and Cybersecurity Risk: Empirical Evidence," Working Papers 2021/02, Nazarbayev University, Graduate School of Business.
    • Handle: RePEc:asx:nugsbw:2021-02
    as

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    File URL: https://gsb.nu.edu.kz/storage/files/5/GSB%20Working%20papers/NUGSB_workingpaper_Lattanzio_Taillard.pdf
    File Function: First version, 2021
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    More about this item

    Keywords

    Mergers and Acquisitions; Cybersecurity Risk; M&A Withdrawal; Valuation;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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