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Cybersecurity breaches and cash holdings: Spillover effect

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  • Priya Garg

Abstract

This paper shows that firms significantly increase cash holdings after they have experienced a cybersecurity attack, and this behavior persists for years. A cyberattack increases cash holdings from a base level of 23% of assets to 26.87%. Similar firms, defined by industry and geographical proximity also increase their cash holdings. Suppliers of attacked firms are also affected. Overall, the results of this study indicate that the detrimental effects of a cybersecurity breach are not isolated to the attacked firms, and peer firms are quick to follow in taking precaution.

Suggested Citation

  • Priya Garg, 2020. "Cybersecurity breaches and cash holdings: Spillover effect," Financial Management, Financial Management Association International, vol. 49(2), pages 503-519, June.
    • Handle: RePEc:bla:finmgt:v:49:y:2020:i:2:p:503-519
    DOI: 10.1111/fima.12274
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    References listed on IDEAS

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    Cited by:

    1. D. Brian Blank & Brandy Hadley & Omer Unsal, 2021. "Financial consequences of reputational damage: Evidence from government economic incentives," The Financial Review, Eastern Finance Association, vol. 56(4), pages 693-719, November.
    2. Harris, Oneil & Nguyen, Trung, 2024. "Asset redeployability and the market reaction to cyberattacks," Finance Research Letters, Elsevier, vol. 70(C).
    3. Martin Eling & Michael McShane & Trung Nguyen, 2021. "Cyber risk management: History and future research directions," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 24(1), pages 93-125, March.
    4. Erkan-Barlow, Asligul & Nguyen, Trung, 2024. "Cybersecurity and executive compensation: Can inside debt-induced risk aversion improve cyber risk management effectiveness?," International Review of Financial Analysis, Elsevier, vol. 93(C).
    5. Crosignani, Matteo & Macchiavelli, Marco & Silva, André F., 2023. "Pirates without borders: The propagation of cyberattacks through firms’ supply chains," Journal of Financial Economics, Elsevier, vol. 147(2), pages 432-448.
    6. Le, Anh-Tuan & Huang, Henry Hongren & Do, Trung K., 2024. "Navigating through cyberattacks: The role of tax aggressiveness," Journal of Corporate Finance, Elsevier, vol. 88(C).
    7. Liu, Xiaohui & Luo, Juan & Yawson, Alfred, 2025. "Equity offering following cyberattacks," Journal of Corporate Finance, Elsevier, vol. 91(C).
    8. Brho, Mazen & Jazairy, Amer & Glassburner, Aaron V., 2025. "The finance of cybersecurity: Quantitative modeling of investment decisions and net present value," International Journal of Production Economics, Elsevier, vol. 279(C).
    9. Jin, Xianglan & Cui, Huizhu & Liu, Fengwei & Hu, Ziqiang & Cai, Yonghao, 2025. "Does cybersecurity regulation promote digital transformation? Evidence from the Cyber Security Law in China," Finance Research Letters, Elsevier, vol. 76(C).
    10. Wang, Jimin & Ho, Choy Yeing (Chloe) & Shan, Yuan George, 2024. "Does cybersecurity risk stifle corporate innovation activities?," International Review of Financial Analysis, Elsevier, vol. 91(C).
    11. Tan, Weijie & Guo, Binhua & Zhang, Qiantao, 2025. "Cybersecurity governance and corporate market value: Perspectives from investor trust and supply chain trust," Pacific-Basin Finance Journal, Elsevier, vol. 90(C).
    12. Matteo Crosignani & Lina Han & Marco Macchiavelli & André F. Silva, 2024. "Securing Technological Leadership? The Cost of Export Controls on Firms," Staff Reports 1096, Federal Reserve Bank of New York.

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