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Cybersecurity data breaches and internal control

Author

Listed:
  • Zhou, Fuzhao
  • Huang, Jianning

Abstract

The present study provides novel evidence of the effects of data breaches on firms' subsequent internal control. We find data breaches to be negatively associated with subsequent disclosure of internal control material weakness (i.e., improved internal control), and CEO dismissal to be an effective mechanism for improving internal control. We further find that data breaches can magnify the accounting expertise effect and attenuate the complexity effect on subsequent internal control, and that firms are less likely to file “Big R” restatements and face litigation subsequent to making improvements in internal control.

Suggested Citation

  • Zhou, Fuzhao & Huang, Jianning, 2024. "Cybersecurity data breaches and internal control," International Review of Financial Analysis, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:finana:v:93:y:2024:i:c:s1057521924001066
    DOI: 10.1016/j.irfa.2024.103174
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    More about this item

    Keywords

    Accounting expertise; Big R restatement; CEO dismissal; Complexity; Data breaches; Internal control;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M15 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - IT Management

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