Terrorism is a growing concern on a global scale that imposes enormous financial burdens on individual and organizational victims. This study aims to investigate the cybersecurity risk among US firms in response to terrorism incidents at the state level.
This study delves into the impact of terrorism on firm-level cybersecurity risk using a multiple-sourced data set of US listed firms from 2008 to 2018. The fixed effect estimator and several endogeneity tests are used to explore and validate the findings.
The authors find that the higher the state-level terrorism intensity, the greater the exposure of firms’ cybersecurity reflected via their cybersecurity disclosure language. Financial constraint is a feasible explanatory channel that suggests that the inability to access loans is key to corporate cyber exposure. The finding is robust to different model specifications and endogeneity tests, including alternative measures of terrorism, propensity score matching and two-stage least-squares with instrumental variables.
The study’s findings highlight the cybersecurity threats in the aftermath of terrorist attacks and advise firms and policymakers to establish a robust cybersecurity strategy to cope with adverse circumstances.
To the best of the authors’ knowledge, this is the first research to delve into the impact of terrorism on firm-level cybersecurity risk from both theoretical and empirical sides.
