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Cybersecurity Risk

Author

Listed:
  • Chris Florackis
  • Christodoulos Louca
  • Roni Michaely
  • Michael Weber
  • Michael Weber

Abstract

We develop a novel firm-level measure of cybersecurity risk using textual analysis of cybersecurity-risk disclosures in corporate filings. The measure successfully identifies firms extensively discussing cybersecurity risk in their 10-K, displays intuitive relations with quantitative measures of cybersecurity risk disclosure language, exhibits a positive trend over time, is more prevalent among industries relying more on information technology systems, correlates with several characteristics linked to firms hit by cyber attacks and, importantly, predicts future cyber attacks. Stocks with high exposure to cybersecurity risk exhibit high expected returns on average, but they perform poorly in periods of increasing attention to cybersecurity risk.

Suggested Citation

  • Chris Florackis & Christodoulos Louca & Roni Michaely & Michael Weber & Michael Weber, 2020. "Cybersecurity Risk," CESifo Working Paper Series 8760, CESifo.
    • Handle: RePEc:ces:ceswps:_8760
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    References listed on IDEAS

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    More about this item

    Keywords

    cyber attacks; risk disclosures; textual analysis; stock returns;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • 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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