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Cybersecurity risk and firm growth: Empirical evidence based on text analysis

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  • Xu, Gengxi
  • Li, Yugang
  • Liu, Shanshan
  • Ye, Zhuhong

Abstract

Despite cybersecurity risk emerging as a critical firm threat, research on effective prevention and response strategies remains limited. Using a sample of A-share listed companies in Shanghai and Shenzhen from 2010 to 2022, this study adopts text analysis to construct indicators that portray the cybersecurity risk of Chinese listed companies and systematically examines the impact of cybersecurity risk on firm growth. The findings reveal that cybersecurity risk significantly inhibits firm growth. Mechanism analysis indicates that cybersecurity risk adversely impacts growth by increasing firms’ excessive cash holdings, amplifying operational risks, and exacerbating financing constraints. Further analysis shows that the growth-inhibiting effect is more pronounced among firms in technology-intensive industries, larger scale, higher media attention, and higher analyst attention. This study provides empirical evidence to guide firms in developing preemptive cybersecurity strategies, supports regulators in implementing differentiated governance, and helps governments refine cybersecurity incentives. These measures help firms strike a balance between growth and risk while supporting effective cybersecurity governance.

Suggested Citation

  • Xu, Gengxi & Li, Yugang & Liu, Shanshan & Ye, Zhuhong, 2026. "Cybersecurity risk and firm growth: Empirical evidence based on text analysis," The North American Journal of Economics and Finance, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:ecofin:v:81:y:2026:i:c:s1062940825001822
    DOI: 10.1016/j.najef.2025.102542
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