Working Paper: CEPR ID: DP16217
Authors: 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.
Keywords: No keywords provided
JEL Codes: G12; G14; G15; G30; G32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cyber risk exposure (K24) | cyberattacks (K24) |
| cyber risk exposure (K24) | stock returns (G12) |
| cyber risk exposure (K24) | profits (L21) |
| cyber risk exposure (K24) | equity option market (G13) |
| cyber risk exposure (K24) | spillover effects to non-exposed peers (C92) |