IDEAS home Printed from https://ideas.repec.org/a/eee/finana/v93y2024ics1057521924001054.html
   My bibliography  Save this article

Cybersecurity and executive compensation: Can inside debt-induced risk aversion improve cyber risk management effectiveness?

Author

Listed:
  • Erkan-Barlow, Asligul
  • Nguyen, Trung

Abstract

This study contributes to the emerging literature on the determinants and the consequences of cyberattacks by examining the impact of inside debt compensation on a firm's likelihood of experiencing a cyberattack and on attacked firms' cash holdings, R&D investments, and asset tangibility. We provide compelling evidence that inside debt compensation reduces the probability of experiencing a cyberattack. Furthermore, we document that high inside debt CEOs reduce their firm's cash holdings while they increase R&D investments and asset tangibility once their firms experience a hacking incident. These effects persist for three years after the attack. Our results are robust to alternative measurements of inside debt compensation and after accounting for potential sample selection and endogeneity concerns. Our findings underscore the importance of inside debt compensation as a governance mechanism that alleviates inefficiencies related to cybersecurity investments.

Suggested Citation

  • Erkan-Barlow, Asligul & Nguyen, Trung, 2024. "Cybersecurity and executive compensation: Can inside debt-induced risk aversion improve cyber risk management effectiveness?," International Review of Financial Analysis, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:finana:v:93:y:2024:i:c:s1057521924001054
    DOI: 10.1016/j.irfa.2024.103173
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1057521924001054
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.irfa.2024.103173?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Cybersecurity; Cyberattacks; Agency theory; Executive compensation; Inside debt; Risk aversion;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:93:y:2024:i:c:s1057521924001054. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620166 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.