Abnormal Returns and Dispersion in Cybersecurity Exposure

24 Pages Posted: 19 Feb 2021

See all articles by Tim Liu

Tim Liu

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Christos Makridis

Stanford University; Arizona State University (ASU); Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: December 10, 2020

Abstract

This paper examines the dispersion in cybersecurity risk across firms. Using new, proprietary data on the Fortune 500 firms, We show that higher productivity firms exhibit abnormal returns. We subsequently document three new facts: (a) higher productivity firms have fewer cybersecurity vulnerabilities, (b) vulnerabilities are highly persistent within-firm, and (c) vulnerabilities are associated with data breaches. Our results suggest that higher productivity firms gain access to more technical human capital resources that are capable of mitigating cybersecurity vulnerabilities.

Keywords: Abnormal Returns, Asset Pricing, Cybersecurity, Data Breach, Stock Market

JEL Classification: G12, G14, G41, H23, H56

Suggested Citation

Liu, Tim and Makridis, Christos, Abnormal Returns and Dispersion in Cybersecurity Exposure (December 10, 2020). Available at SSRN: https://ssrn.com/abstract=3746589 or http://dx.doi.org/10.2139/ssrn.3746589

Tim Liu

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Christos Makridis (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

Arizona State University (ASU) ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

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