From Bits to Bonds: The Economic Ripple of Local Cyberattacks on Municipalities

70 Pages Posted: 18 Jun 2023 Last revised: 6 Feb 2024

See all articles by Lefteris Andreadis

Lefteris Andreadis

Cyprus University of Technology; Bank of Greece

Elena Kalotychou

Cyprus University of Technology

Christodoulos Louca

Cyprus University of Technology

Christian T. Lundblad

University of North Carolina Kenan-Flagler Business School; Frank Hawkins Kenan Institute of Private Enterprise

Christos Makridis

Stanford University; Institute for the Future (IFF), Department of Digital Innovation, School of Business, University of Nicosia; Arizona State University (ASU); Department of Veterans Affairs (VA)

Date Written: October 14, 2022

Abstract

We investigate the economic repercussions of cyberattacks at the local government level. Employing a difference-in-differences approach to identify causal effects, we find significant increases in bond yields and reductions in bond issuance for municipalities situated in counties most exposed to cyberattacks targeting local entities, and their pertinent news. Heterogeneous effects related to investor clientele suggest a capital supply channel. Municipalities respond to financing shortages by drawing their cash holdings and by reducing their more elastic investments. Overall, awareness and prevalence of cybersecurity risk hinder local government entities’ access to capital by limiting their ability to provide public services and infrastructure.

Keywords: Cyberattack, Media, Municipal Bonds, Public Finance, Public attention

JEL Classification: G12, G14, H74

Suggested Citation

Andreadis, Lefteris and Kalotychou, Elena and Louca, Christodoulos and Lundblad, Christian T. and Makridis, Christos, From Bits to Bonds: The Economic Ripple of Local Cyberattacks on Municipalities (October 14, 2022). Kenan Institute of Private Enterprise Research Paper No. 4473545, Available at SSRN: https://ssrn.com/abstract=4473545 or http://dx.doi.org/10.2139/ssrn.4473545

Lefteris Andreadis (Contact Author)

Cyprus University of Technology ( email )

Limassol, 3603
Cyprus

Bank of Greece ( email )

21 E. Venizelos Avenue
GR 102 50 Athens
Greece

Elena Kalotychou

Cyprus University of Technology ( email )

Limassol, 3603
Cyprus

Christodoulos Louca

Cyprus University of Technology ( email )

Limassol, 3603
Cyprus

Christian T. Lundblad

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-8441 (Phone)

Frank Hawkins Kenan Institute of Private Enterprise ( email )

Campus Box 3440, The Kenan Center
Chapel Hill, NC 27599-344
United States

Christos Makridis

Stanford University ( email )

Stanford, CA 94305
United States

Institute for the Future (IFF), Department of Digital Innovation, School of Business, University of Nicosia ( email )

Nicosia, 2417
Cyprus

Arizona State University (ASU) ( email )

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

Department of Veterans Affairs (VA) ( email )

810 Vermont Avenue NW
Washington, DC 20420
United States

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