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Pirates without borders: The propagation of cyberattacks through firms’ supply chains

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  • Crosignani, Matteo
  • Macchiavelli, Marco
  • Silva, André F.

Abstract

This paper examines the supply chain effects of the most damaging cyberattack in history so far. The attack propagated from the directly hit firms to their customers, causing a four-fold amplification of the initial drop in profits. These losses were larger for affected customers with fewer alternative suppliers. Internal liquidity buffers and increased borrowing, mainly through bank credit lines, helped firms navigate the shock. Nonetheless, the cyberattack led to persistent adjustments to the supply chain network, with affected customers terminating trading relations with directly hit firms and forming new ones with alternative suppliers with a stronger cybersecurity posture.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:jfinec:v:147:y:2023:i:2:p:432-448
    DOI: 10.1016/j.jfineco.2022.12.002
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    Cited by:

    1. Martin Boyer & Martin Eling, 2023. "New advances on cyber risk and cyber insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 48(2), pages 267-274, April.
    2. Aldasoro, Iñaki & Gambacorta, Leonardo & Giudici, Paolo & Leach, Thomas, 2022. "The drivers of cyber risk," Journal of Financial Stability, Elsevier, vol. 60(C).
    3. Antonio De Vito & Martin Jacob & Dirk Schindler & Guosong Xu, 2023. "How Do Corporate Tax Hikes Affect Investment Allocation within Multinationals?," CESifo Working Paper Series 10272, CESifo.
    4. Joseph G. Haubrich, 2021. "Stress, Contagion, and Transmission: 2020 Financial Stability Conference," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2021(07), pages 1-5, March.
    5. Yuxue Chi & Zhongbo Jing & Zhidong Liu & Xinge Zhou, 2024. "Risk spillovers in Chinese production network: A supply-side shock perspective," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-16, December.
    6. Akey, Pat & Grégoire, Vincent & Martineau, Charles, 2021. "Price Revelation from Insider Trading: Evidence from Hacked Earnings News," SocArXiv qe6tu, Center for Open Science.
    7. Camelia Minoiu & Andrés Schneider & Min Wei, 2023. "Why Does the Yield Curve Predict GDP Growth? The Role of Banks," Finance and Economics Discussion Series 2023-049, Board of Governors of the Federal Reserve System (U.S.).
    8. Ersahin, Nuri & Giannetti, Mariassunta & Huang, Ruidi, 2024. "Supply chain risk: Changes in supplier composition and vertical integration," Journal of International Economics, Elsevier, vol. 147(C).
    9. Crosignani, Matteo & Han, Lina & Macchiavelli, Marco & Silva, Andre F., 2024. "Geopolitical Risk and Decoupling: Evidence from U.S. Export Controls," CEPR Discussion Papers 18986, C.E.P.R. Discussion Papers.
    10. Boot, Arnoud & Hoffmann, Peter & Laeven, Luc & Ratnovski, Lev, 2021. "Fintech: what’s old, what’s new?," Journal of Financial Stability, Elsevier, vol. 53(C).
    11. Jens Foerderer, 2023. "Should we trust web-scraped data?," Papers 2308.02231, arXiv.org.
    12. Tsvetanov, Tsvetan & Slaria, Srishti, 2021. "The effect of the Colonial Pipeline shutdown on gasoline prices," Economics Letters, Elsevier, vol. 209(C).
    13. Zhu, Ying & Huang, Ke, 2023. "Customers’ litigation risk and suppliers’ cash holding decision: From the perspective of risk contagion," Finance Research Letters, Elsevier, vol. 55(PB).

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    More about this item

    Keywords

    Financial crisis; Cyberattacks; Supply chains; Bank credit;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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