Managerial Myopia and Cybersecurity

Posted: 22 Nov 2019

See all articles by Wen Chen

Wen Chen

City University of Hong Kong (CityUHK)

Haibin Wu

City University of Hong Kong (CityUHK)

Liandong Zhang

Singapore Management University - School of Accountancy

Date Written: November 12, 2019

Abstract

Using a large sample of U.S. firms for the period 2005–2017, we provide evidence that managerial myopic actions contribute to corporate cybersecurity risk. Specifically, we show that abnormal cuts in discretionary expenditures, our proxy for myopic actions, are positively associated with the likelihood of data breaches. The association is largely driven by firms that appear to cut discretionary expenditures to meet short-term earnings targets. In addition, the association is stronger for firms with greater equity incentives, a high earnings response coefficient, low levels of institutional or block ownership, or large market shares.

Keywords: cybersecurity, data breach, managerial myopia, discretionary expenditures, real effect

JEL Classification: G31; G32; G34; M15; M41

Suggested Citation

Chen, Wen and Wu, Haibin and Zhang, Liandong, Managerial Myopia and Cybersecurity (November 12, 2019). Available at SSRN: https://ssrn.com/abstract=3485532

Wen Chen (Contact Author)

City University of Hong Kong (CityUHK) ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Haibin Wu

City University of Hong Kong (CityUHK) ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Liandong Zhang

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore

HOME PAGE: http://accountancy.smu.edu.sg/faculty/profile/150531/Liandong-ZHANG

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