An Empirical Investigation of the Relationship Between Local Government Budgets, IT Expenditures and Cyber Losses

IEEE Transactions on Emerging Topics in Computing

University of Illinois College of Law Legal Studies Research Paper No. 19-31

16 Pages Posted: 13 Jun 2019

See all articles by Jay P. Kesan

Jay P. Kesan

University of Illinois College of Law

Linfeng Zhang

University of Illinois Department of Mathematics

Date Written: May 3, 2019

Abstract

Information technology (IT) is the key component of e-government infrastructures, but at the same time, it makes governments more exposed to the cyber risk. In this study, we take an empirical approach to investigate the cyber risk in the public sector. We describe the most common cyber threats facing local governments and build linear models to explain the relationships between cyber losses, local government budgets and IT expenditures. We find that local governments are affected by cyber incidents more frequently, and disruption incidents that lead to the malfunction of e-government services are on the rise. In addition, the magnitude of cyber losses used to have a strong positive relationship with the affected governments’ budget size. However, in recent years, this relationship is weakening, and small local governments are more heavily impacted by cyber incidents than before. Our findings further suggest that investing in information technology is becoming more effective in terms of lowering the loss-to-budget ratio. However, this also means local governments with small budgets do not benefit from this change as much as the large ones do.

Keywords: Cybersecurity, Cyber Losses, E-Government, IT Governance

Suggested Citation

Kesan, Jay P. and Zhang, Linfeng, An Empirical Investigation of the Relationship Between Local Government Budgets, IT Expenditures and Cyber Losses (May 3, 2019). IEEE Transactions on Emerging Topics in Computing , University of Illinois College of Law Legal Studies Research Paper No. 19-31, Available at SSRN: https://ssrn.com/abstract=3382576

Jay P. Kesan (Contact Author)

University of Illinois College of Law ( email )

504 E. Pennsylvania Avenue
Champaign, IL 61820
United States
217-333-7887 (Phone)
217-244-1478 (Fax)

HOME PAGE: http://www.jaykesan.com

Linfeng Zhang

University of Illinois Department of Mathematics ( email )

Champaign, IL 61820
United States

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