Cyber-Risk Disclosure: Who Cares?

59 Pages Posted: 17 Oct 2016

See all articles by Gilles Hilary

Gilles Hilary

Georgetown University - Department of Accounting and Business Law

Benjamin Segal

Fordham University; Hebrew University of Jerusalem

May H. Zhang

Fordham University - Graduate School of Business Administration

Date Written: October 14, 2016

Abstract

Cyber-risks have generated considerable interest in the media and in the public. Perhaps as a response, regulators are devoting an increasing amount of resources to improving corporate disclosure related to these risks. In contrast, we find that, despite this increased focus, cyber risk disclosures by publicly listed firms remain scant. Moreover, a qualitative analysis of five major cases as well as a systematic analysis of security price reactions upon the announcement of breaches shows that the effect on stock prices is very limited. We do not observe strong reactions after the breaches. A “Diff-in-Diff” analysis reveals that the change in operational performance, in executive departure likelihood, in shareholder clientele or in the amount of disclosure does not differ from the changes in a matched sample of firms that were not breached. This lack of reaction is inconsistent with a market or regulatory failure associated with the poor disclosure on cyber-risk.

Keywords: cyber-security, privacy, disclosure

Suggested Citation

Hilary, Gilles and Segal, Benjamin and Zhang, May H., Cyber-Risk Disclosure: Who Cares? (October 14, 2016). Georgetown McDonough School of Business Research Paper No. 2852519, Available at SSRN: https://ssrn.com/abstract=2852519 or http://dx.doi.org/10.2139/ssrn.2852519

Gilles Hilary (Contact Author)

Georgetown University - Department of Accounting and Business Law ( email )

McDonough School of Business
Washington, DC 20057
United States

Benjamin Segal

Fordham University ( email )

113 West 60th Street
New York, NY 10023
United States

Hebrew University of Jerusalem

May H. Zhang

Fordham University - Graduate School of Business Administration ( email )

1790 Broadway, 13th FL
New York, NY 10019
United States

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