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The Anatomy of Cyber Risk

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  • Rustam Jamilov
  • Hélène Rey
  • Ahmed Tahoun

Abstract

This paper uses computational linguistics to introduce a novel measure of firm-level cyber-risk exposure based on quarterly earnings conference calls of listed firms. Our data span 13,000 firms from 85 countries over 2002-2021. We show cyber-risk exposure predicts cyber-attacks, affects stock returns and profits, and is priced in the equity option market. Cyber-risks spill over across firms and pass through from firm to sectoral level. The geography of cyber-risk is well approximated by a gravity model in which financial proximity is key. Back-of-the-envelope calculations suggest that the global cost of cyber-risk is over $200 billion per year.

Suggested Citation

  • Rustam Jamilov & Hélène Rey & Ahmed Tahoun, 2021. "The Anatomy of Cyber Risk," NBER Working Papers 28906, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28906
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    1. Crosignani, Matteo & Macchiavelli, Marco & Silva, André F., 2023. "Pirates without borders: The propagation of cyberattacks through firms’ supply chains," Journal of Financial Economics, Elsevier, vol. 147(2), pages 432-448.
    2. Küsters Anselm & Andritzky Jochen, 2024. "Welche Rolle spielt das Thema Zukunft im Bundestag?," Wirtschaftsdienst, Sciendo, vol. 104(4), pages 252-257, April.
    3. Zacharias Sautner & Laurence Van Lent & Grigory Vilkov & Ruishen Zhang, 2023. "Firm‐Level Climate Change Exposure," Journal of Finance, American Finance Association, vol. 78(3), pages 1449-1498, June.
    4. Chang, Jin-Wook & Jayachandran, Kartik & Ramírez, Carlos A. & Tintera, Ali, 2024. "On the anatomy of cyberattacks," Economics Letters, Elsevier, vol. 238(C).
    5. Boungou, Whelsy, 2023. "Cyber-attacks and banking intermediation," Economics Letters, Elsevier, vol. 233(C).
    6. Anand, Kartik & Duley, Chanelle & Gai, Prasanna, 2022. "Cybersecurity and financial stability," Discussion Papers 08/2022, Deutsche Bundesbank.

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    JEL classification:

    • F3 - International Economics - - International Finance
    • G0 - Financial Economics - - General

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