The impact of managerial myopia on cybersecurity: Evidence from data breaches

Author

Wen CHEN
Xing LI
Haibin WU
Liandong ZHANG, Singapore Management UniversityFollow

Publication Type

Journal Article

Version

acceptedVersion

Publication Date

9-2024

Abstract

Using a 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 managerial myopia, 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 short-term equity incentives, higher earnings response coefficients, low levels of institutional block ownership, or large market shares. Finally, firms appear to increase discretionary expenditures upon the announcement of data breaches by their industry peers.

Keywords

Cybersecurity, Data breach, Discretionary expenditures, Managerial myopia, Peer effect, Real earnings management

Discipline

Accounting | Information Security | Management Information Systems

Research Areas

Corporate Governance, Auditing and Risk Management

Publication

Journal of Banking and Finance

Volume

166

First Page

1

Last Page

14

ISSN

0378-4266

Identifier

10.1016/j.jbankfin.2024.107254

Publisher

Elsevier

Citation

CHEN, Wen; LI, Xing; WU, Haibin; and ZHANG, Liandong. The impact of managerial myopia on cybersecurity: Evidence from data breaches. (2024). Journal of Banking and Finance. 166, 1-14.
Available at: https://ink.library.smu.edu.sg/soa_research/2047

Copyright Owner and License

Authors

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.

Additional URL

https://doi.org/10.1016/j.jbankfin.2024.107254