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Cybersecurity and Bank Distance-to-Default

Author

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  • Yuna Heo

    (University of Basel - Faculty of Business and Economics; Swiss Finance Institute)

Abstract

This study investigates the impact of cybersecurity risk on bank fragility. By utilizing a novel bank-specific indicator of cybersecurity, we find that an increase in cybersecurity risk raises the probability of bank default. The effect is larger for banks facing deposit withdrawal, but less pronounced for banks with ample liquidity buffers. Further we show that data security laws can help reduce the potential fragility in banking; nonetheless, the influence of cybersecurity risk remains significant. Our findings provide suggestive evidence that cybersecurity risk exacerbates financial instability, but implementing adaptation policies can strengthen resilience against possible cyberattacks.

Suggested Citation

  • Yuna Heo, 2025. "Cybersecurity and Bank Distance-to-Default," Swiss Finance Institute Research Paper Series 25-69, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2569
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    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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