Cybersecurity Risk

95 Pages Posted: 4 Nov 2020 Last revised: 29 Mar 2022

See all articles by Chris Florackis

Chris Florackis

University of Liverpool (UK)

Christodoulos Louca

Cyprus University of Technology

Roni Michaely

The University of Hong Kong; ECGI

Michael Weber

University of Chicago - Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 4 versions of this paper

Date Written: March 17, 2022


Using textual analysis and comparing cybersecurity-risk disclosures of firms that were hacked to others that were not, we propose a novel firm-level measure of cybersecurity risk for all US-listed firms. We then examine whether cybersecurity risk is priced in the cross-section of stock returns. Portfolios of firms with high exposure to cybersecurity risk outperform other firms, on average, by up to 8.3% per year. At the same time, high-exposure firms perform poorly in periods of high cybersecurity risk. Reassuringly, the measure is higher in information-technology industries, correlates with characteristics linked to firms hit by cyberattacks, and predicts future cyberattacks.

Keywords: Cyber attacks, Risk Disclosures, Textual Analysis, Stock returns

JEL Classification: G14, G12, G32

Suggested Citation

Florackis, Chris and Louca, Christodoulos and Michaely, Roni and Weber, Michael, Cybersecurity Risk (March 17, 2022). Review of Financial Studies, Forthcoming, Chicago Booth Research Paper No. 20-47, Swiss Finance Institute Research Paper No. 20-108, Available at SSRN: or

Chris Florackis

University of Liverpool (UK) ( email )

The Management School
University of Liverpool
Liverpool, L 697ZH
United Kingdom

Christodoulos Louca

Cyprus University of Technology ( email )

Limassol, 3603

Roni Michaely

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Michael Weber (Contact Author)

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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