The Anatomy of Cyber Risk
We construct novel text-based measures of firm-level cyber risk exposure based on quarterly earnings calls of 12,000+ firms from 85 countries over 20+ years. We categorize each cyber-related discussion into topics that capture sentiment, monetary loss, country names, etc. We document new facts on the worldwide rise of cyber risk and its industrial and geographical composition. We characterize most affected firms and show that our indices can predict future cyberattacks. Cyber risk exposure has significant direct and contagion effects on stock returns. Finally, there is a factor structure in our firm-level measures and shocks to the common factor are priced.
We thank our discussants, Jinfei Sheng and Ishita Sen, as well as Matteo Crosignani, Ralph Koijen, Anna Kovner, Richard Portes, Elias Papaioannou and participants of the AFA 2021 Annual Meeting and the ECB-RFS Macro-Finance Conference for useful comments and suggestions. Aakash Kalyani and especially Markus Schwedeler provided outstanding research assistance. Jamilov acknowledges financial support from the Wheeler Institute for Business and Development. Tahoun sincerely appreciates support from the Institute for New Economic Thinking (INET). The paper does not represent the view of the Haut Conseil de Stabilité Financière. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.