Work

Cybersecurity risk and firm investment efficiency

Year: 2025

Type: article

Abstract: This paper examines the relationship between cybersecurity risk and firm investment efficiency. It documents that cybersecurity risk contributes to overinvestment but does not influence underinvestment. The results remain robust after considering endogeneity concerns and alternative model specifications. We also identify key underlying mechanisms driving the relationship, including empire-building, external monitoring, and information asymmetry. Specifically, the impact of cybersecurity risk on overinvestment is more pronounced among firms with greater empire-building tendencies, weaker external monitoring, and higher information asymmetry.

Source: Finance research letters

DOI: 10.1016/j.frl.2025.108266

Authors: Thao Dinh, Hsin-I Chou, Jing Zhao

Institutions: La Trobe University, RMIT University

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Industry, innovation and infrastructure

Open Access status: hybrid

Estimated APC paid: $3,730