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Do Lenders Price Firms’ Cybersecurity Risks?

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  • Choi, Bokmin
  • Degryse, Hans
  • Smedts, Kristien

Abstract

Firms are increasingly exposed to cybersecurity risks. Using syndicated loan data covering US firms, we examine how lenders price firms’ ex-ante cybersecurity risks. Our findings indicate that lenders on average charge a 4 to 13 basis points higher loan rate when a firm exhibits greater cybersecurity risks over time. Furthermore, we document that the pricing of cybersecurity risks differs between lender types, as well as within the same lender type depending on their level of awareness of the risks. Commercial banks tend to adopt a more stringent approach to pricing cybersecurity risks compared to non-bank lenders. They also impose more financial covenants and monitor more intensively as firms become riskier. Even within commercial banks, the pricing of cybersecurity risks is primarily driven by lenders who recognize their own cybersecurity risks and have discussed internal risk management policies. These findings highlight the importance of lender awareness on the pricing of unconventional risks. Lastly, the purchase of cybersecurity insurance does not mitigate higher loan spreads.

Suggested Citation

  • Choi, Bokmin & Degryse, Hans & Smedts, Kristien, 2025. "Do Lenders Price Firms’ Cybersecurity Risks?," CEPR Discussion Papers 20335, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:20335
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    File URL: https://cepr.org/publications/DP20335
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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