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Cybersecurity breaches and investors’ interest in the firm as an investment

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  • Demek, Kristina C.
  • Kaplan, Steven E.

Abstract

Cybersecurity breaches pose a significant risk to firms. To combat these risks, many firms engage in strategic cybersecurity risk management initiatives. While these efforts may reduce the likelihood of a cybersecurity breach, they do not eliminate the risk of a breach. In the event of a cybersecurity breach, firms may issue an apology to investors. This study uses an experiment to examine whether a firm indicates cybersecurity risk management is a strategic initiative and whether a post-cybersecurity breach apology by the CEO impacts nonprofessional investors’ investment interest in the firm. Results show that, in response to a cybersecurity breach, the presence of a CEO apology positively impacts investors’ investment impression and their perceptions of CEO affective and CEO cognitive trust. We find that investors’ investment interest is lowest for a firm that previously indicates cybersecurity risk management is a strategic initiative and where the CEO does not issue an apology. The CEO apology, however, does not significantly impact investment amount, a secondary measure of investor interest. Results from this study have implications for managers, investors, and regulators.

Suggested Citation

  • Demek, Kristina C. & Kaplan, Steven E., 2023. "Cybersecurity breaches and investors’ interest in the firm as an investment," International Journal of Accounting Information Systems, Elsevier, vol. 49(C).
    • Handle: RePEc:eee:ijoais:v:49:y:2023:i:c:s1467089523000088
    DOI: 10.1016/j.accinf.2023.100616
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    References listed on IDEAS

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    1. Pigola, Angélica & Da Costa, Priscila Rezende & Ferasso, Marcos & Cavalcanti da Silva, Luís Fabio, 2024. "Enhancing cybersecurity capability investments: Evidence from an experiment," Technology in Society, Elsevier, vol. 76(C).

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